Life Insurance as an investment
Do you believe insurance is an investment?
Have you invested heavily in investment products?
If you have invested in insurance for investment purpose, you have done a mistake.
Insurance is never an investment option and insurance was never meant to be an investment like stock market or real estate.
Even if you compare average return on insurance policies it is not more than a normal fixed deposit.
Insurance is meant to be for securing financial security of your family and it should be considered for this purpose only.
What is the purpose of Life insurance?
The purpose of life insurance is to make sure that family does not suffer in case of death of its earnings member.
The main purpose of you taking a life insurance should be to insure financial security of those depended on you. You should never consider insurance as an investment option for better returns, you will never get.
Life insurance agents, sell their products. Most of time they will advice you to go for money back policies. They get high commission for selling money back or other policies.
But issue with money back policies is that sum insured will be very less compared to premium you pay.
Agents will never sell you term insurance policies because they get very less commission on these.
Term insurance policy is the best life insurance policy.
Major differences between a term insurance policy and money back policy are:
- You will not receive any money unless you die in case of term insurance, in case of money back policy you will receive your money after maturity
- Sum insured will be very high with same premium in case of term insurance
- Premium will be high in case of money back policy
If you are planning to take a life insurance policy go for term insurance. Let me explain you with an example, why term insurance is better than money back policies and how to come out of this investment trap.
If you buy a term insurance policy with sum insured of Rs. 50 lakhs, your premium will be in range of Rs. 5,000 to 15,000. If you buy a money back policy with sum insured Rs. 50 lakh you premium will be in range of 1,00,0000 to 5,00,000 depending on tenure of policy.
Only benefit you will have in case of money back policy is that you will get your money back even in case of no death.
But do not forget that main purpose of an insurance is to secure future of your family.
If you income is low, you should never go for those policies with 2 lakh maturity amount. 2 lakh is nothing at this time.
If you are earning below Rs. 1 lakh per month, you should opt for a term insurance plan. Premium will be 10,000 to 20,000 yearly and you can buy a term insurance worth Rs. 50 lakh maturity.
God forbid but if you die after 5 years, your family will have Rs. 50 lakhs to survive.
I am writing this article because I have seen my parents bought insurance policies with maturity amount of Rs. 2 lakhs, 15 years back. These were money back policies, now we got Rs. 2 lakh since maturity period is over. But what is value of 2 lakh today.
Even if they did not buy these policies there would be no difference since FD or RD would have given better returns.
Always go for a term insurance policy, it will be best for security of your family after you are gone.
For investment look other options, insurance is never an investment option if you are looking for great returns.
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