Term Insurance - Why This is the Only Policy You Will Ever Need to Buy?
By John of Cashvally.com
Well lets start with a very basic question? Why do we take policies ? Is it
for sake i.e cover the risk of loss of the asset insured, or is it for investment? Or
is it for both? The answer to this could be all three.There are people who buy it just for
insurance sake, while some buy it for investment purposes, while some others see it as both as
an investment and tool.
So which is the right way of approaching insurance? Friends, polices are meant only
for sake and NOTHING else. Get this very clear. It is NOT an investment tool, at least
not an effective one.
So first thing to do is to buy only for sake. And one must have in
his portfolio as it is the most important hedge against any eventuality that might rock your
finances. Now, that its clear that we need an plan which actually serves to meet the
"insurance" promise, which policy should we go for ? Basically there are only 2 types of
insurance plans ie. endowment and pure term plans. The plan to go for is TERM INSURANCE only.
Term Insurance is the basic policy which seeks to provide life cover to the subject
insured at a very nominal premium without offering any survival benefits.Some people might ask
this: Now if it does not provide survival benefits , how is it better? Don't we end up loosing
all the money we paid if we were to survive?Lets try and understand the reasons why term
insurance is the only plan you will ever need to buy.
1. Meets the need for life cover at the lowest possible premium - Term plans offer you life
cover at much lower premiums as compared to endowment plans. For example,
LIC Anmol Jeevan Term Plan, the premium for a 30 year old male, SA of RS 20lakhs and for 20
years is Rs 7578 annually. While if the same person was to take endowment plan of Rs 20 lakhs
the premium would be Rs 95910.Need I say more? Just see the difference.
2. Lower charges than Endowment Plans - The biggest disadvantage with endowment plan is its
ridiculously high cost structure. Conversely, the biggest advantage of term plan is its low
charges. Endowment plans might eat up to 50-60% of your premium as charges in first few years
and subsequently too the charges are higher as compared to term plan. These charges are taken
in the name of mortality charges, admin charges, fund management etc. The biggest reason for
this is that they have to pay huge commission to the agent selling you endowment plans. You can
avoid paying such high charges by buying term plan. Simple.
3. Lets you play "Buy Term and Invest Rest Strategy"- In the beginning of this post, I mentioned
that its not wise to look at plans as an investment tool and the reason for this is
that there are better investment options available in the market which give far superior returns
than any plan will ever give.So for all those wanting to have for self and
also get some returns the option is to play"Buy Term and Invest Rest Strategy". For example, in
the earlier example if a 30 year male wants 20lakhs worth cover , he could buy LIC term plan for
RS 7578 and invest the difference (Rs 95910-7578) Rs88332 in any good equity diversified fund
which will give at least 15-18% returns over 20 years if not more. No plan can ever
give you better returns than well diversified equity fund. Few of the good equity diversified
mutual funds are Reliance Growth Fund, HSBC EQUITY , Sahara Growth etc.
So friends, my advice to you is that you MUST buy for self and others and with
insurance I off course mean Term Plan ONLY.
Term Insurance Recommended by John ,Click Here Now
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