Life insurance is a financial cover that will protect our family i.e. financial dependent in the event of death. Think of your family position during your absence , how they will struggle for financial position and even for living daily life.
Types of Life Insurance
- Endowment plan – Covering life and giving lumpsum on maturity
- Money Back plan – Covering life and getting money at regular intervals instead of lumpsum
- ULIPS Plan – Life cover and investment
- Term Plan – Only life cover
Caution: Don’t ever go for Endowment ,Money back and ULIPs plan. My recommendation is only Term Insurance.. Continue to read to get clarification on this.
| Plan | No of Years Insured | Approximate Premium/Per Year | Amount Covered | Approximate Survival Benefit | Lock in Period | Age |
|---|---|---|---|---|---|---|
| Endowment Plan | 20 | 30000 | 5 Lac | 10,0000,0 | Minimum 3 years | 30 |
| Money Back Plan | 20 | 30000 | 5Lac - paid 25-25-50% in 5-10-15 Years | 5,00,000 | Minimum 3 years | 30 |
| ULIPS Plan | 20 | 30000 | 5 Lac | Best on fund selection for investment | Minimum 5 years | 30 |
| Term Insurance Plan | No restriction can be up to 80 yrs of Age | 12000 | 1 Crore | Nil | Can stop at anytime | 30 |
If you see above table clearly the term insurance is best option , let me explain
- Less Premium – With less premium you can cover more amount for 1 crore cover need to spend around 10k at the age of 30.
- Real cover – For other plans we need to pay nearly 30 k for 5 lac cover, but for term policy you need much less to cover even for 1 crore. Tomorrow in our absence 5 lac won’t help one year also for our family to live the same standard of life where you left, but surely 1 crore will help them to survive with out reducing their standards even if they will keep this amount bank FD.
- Formula: Monthly expense * 10 is the better way to cover your life .
Instead paying more premium and less cover , go for term insurance and remaining amount say for example 18k you can invest in mutual fund if you don’t have the knowledge invest in index funds.
This will cover 1 crore in 10-12 k and you will get returns of approx 15L as returns with 12% it may be more than that for the amount of 1500 as SIP or 18K yearly.
Others Plans – 30k – 5L cover or 10 Lac returns.
Term Plans – 12 k – 1 crore cover and SIP of 18k/year – 15Lac return.
Insurance company won’t get benefit from term plan much so they won’t sell this plan , but this is the most beneficial life insurance plan for a person. If you calculate returns of other plan it won’t even 3% per Annum.
Think wisely and divide insurance and investment as separate thing other wise we will be in big loss in long-term. Nowadays you can opt for term insurance form online itself with less paperwork,