Mr. Rahul, had invested in endowment plans, which he believed was sufficient enough to provide optimal insurance cover and a yield an investment return. He was paying a premium of ₹52,392 every year for an endowment policy having a sum assured of ₹15 lakh. The policy term was 30 year and he was happy with the fact that the policy also gave him bonus additions besides the guaranteed corpus of ₹15 lakh on death or maturity.
Is Mr. Rahul, right?
No, investment in insurance policy does not provide him & his family financial security in case on any premature uncertain events. Is ₹ 15 lakh sufficient in meeting his family’s financial needs?Or In today’s falling interest rate economy, how long do you think maturity benefit would suffice in meeting the Rahul’s family living expenses? Or Will ₹15 lakh cover Mr. Rahul’s child future education? Or medical cost?
In Simple terms, Insurance is protection against any loss financially or life. Life insurance is a security for nominees in case of death of policy holder. Main Objective of insurance is to provide financial protection & not investment or to generate returns.
Term Insurance plans are pure life insurance plans which promise to provide financial security to nominee only if insured or policy holder dies during the term of policy. They are the simplest and most affordable form of life insurance
Why Term Life Insurance plan?
• Affordable premium& Highest financial cover
Given the nature of term plans, their premiums are much lower than other traditional insurance plans. In fact, among all life insurance plans, term plans have the lowest premium. This low premium allows you to afford an optimal sum assured so that you can ensure sufficient financial security for your family in your absence. Other life insurance plans, i.e., traditional plans such as endowment policies, on the contrary, have higher premiums.
For Instance:
Premium of 50 Lakh Term insurance plan per annum is ₹ 3,894*
Premium of 50 Lakh endowment plan per annum is ₹1,53,814*
Most of us buy insurance plans offering guaranteed benefits and overlook term insurance plans. When buying life insurance, we suggest Term Life plans should be given priority. An investor should never merger two different objectives, Investment & insurance.
Finally, investors need to remember that life insurance is an essential part of a good financial plan& Term plans fulfills its objective.
*Premium for 25 years old individual for 30 Years policy term.