Plan your life insurance the right way

Buying life insurance in Bangladesh often feels less like financial planning and more like an obligation—something you buy because a relative is an agent or because you need a tax rebate. But this casual approach often leads to policies that drain your wallet without protecting your family.

Step 1: Start Young

The most common mistake people make is procrastination. In your 20s, you feel invincible. In your 30s, you have other expenses. By your 40s, when you finally feel the "need," the premiums have skyrocketed.

Lock in a policy as soon as you start earning. Premiums are calculated based on age and health. A policy bought at age 25 can cost 50% less than the exact same policy bought at age 35. Treating insurance as an "early career" purchase rather than a "retirement" purchase is the smartest financial move you can make.

Step 2: Count the Coverage, not just Premium

Most people decide how much insurance to buy based on how much they can afford to save monthly.This is backward. Instead calculate your Replacement Income Need. If you pass away, your family loses your annual income for the next 10-20 years.

Step 3: Distinguish Protection from Investment

In Bangladesh, we love "money back" policies (Endowment/DPS). While good for savings, they often offer very low death benefits. Understand the two main types:

Term Life: Pure protection. You pay a small amount for huge coverage (e.g., Tk 1 Crore coverage for a low premium), but you get nothing back if you survive the term.

Endowment/Whole Life: Savings + Protection. You get maturity benefits, but the premiums are much higher for lower coverage. A balanced plan often involves a Term Policy to cover big risks (death/loans) and an Endowment Policy for long-term savings goals.

Step 4: Don't Rely Solely on Your Office Insurance

Many corporate employees in Bangladesh think, "My company has Group Life Insurance, so I'm covered." This is a dangerous assumption. Remember that your employer's cover is tied to your job. If you switch jobs, get laid off, or retire, that cover vanishes instantly. Always hold a personal policy that travels with you, ensuring you are never left unprotected during career transitions.

Step 5: Be Brutally Honest

The no. 1 reason claims are rejected in Bangladesh is "Non-Disclosure of Material Facts." If you hide a history of smoking, diabetes, or a previous surgery to get a lower premium, you are essentially paying for a worthless piece of paper. Disclose everything. Even if it raises your premium slightly, it guarantees that your family's claim won't be rejected on a technicality later. Peace of mind is worth the extra cost.

What You Gain vs. What You Risk

The Perks

Tax Savings: You can claim tax rebates on annual premiums, effectively reducing your yearly income tax liability.

Emergency Liquidity: Traditional policies allow you to take loans against the policy's surrender value during financial crises.

Living Benefits: Riders like Critical Illness cover provide cash payouts for medical treatments while you are still alive.

The Risks

Inflation Impact: Fixed long-term payouts may lose significant purchasing power over 20 years due to inflation.

The Lapse Trap: Stopping premium payments within the first two years often results in a 100% loss of your investment.

Hidden Exclusions: Claims can be denied based on waiting periods or undisclosed pre-existing conditions found in the fine print.

The Bottom Line

Life insurance isn't just a tax-saving tool; it is the final love letter you write to your family. By avoiding these common planning errors, you ensure that the promise you make to protect them is one you can actually keep.