Many people mix insurance and investment together! But the truth is that the real purpose of insurance is to provide protection, not to give returns from investment!
If you want the right insurance, then only term insurance is the best option!
As I mentioned in my previous video, today we will discuss term insurance vs traditional insurance in detail and understand which plan is better for you!
Insurance – not just a product, but a safety shield!
Insurance is just a risk management tool, which provides financial security to your family, if you are suddenly no longer in this world!
So whenever you buy insurance, it should be taken with a very practical thinking.
You have to think that if the sole earning member of the family passes away, then what financial burdens can come on his family? And how can you safeguard them?
This is why term insurance is the right choice for you! This is a pure protection plan where the nominee gets the full claim on the death of the insured person.
Life is uncertain, and the emotional loss caused by someone's death cannot be compensated, but financial loss can certainly be minimized!
How much term insurance should you buy?
A common rule of thumb says that:
'You should buy term insurance of 10 to 12 times your annual salary'
If your annual salary is ₹30 lakh, you should buy term insurance of at least ₹3 crore.
The sooner you buy term insurance, the lower the premium and the sooner the life cover starts!
For how many years should you buy term insurance?
- When will your financial responsibilities end?
- How much retirement corpus have you built?
If you are 25 years old and want to be done with all your financial responsibilities by the age of 55, you should buy a 30-year term plan.
Many plans offer cover till 70 years, but practically, will you have any responsibilities left till 70 years?
a) You should have a sound retirement corpus by the age of 58-60 years.
b) And you should be able to arrange for your monthly expenses through SWP (Systematic Withdrawal Plan), without compromising on your lifestyle.
Traditional Insurance Plans – Are they really beneficial?
Many insurance agents will ask you to buy “Guaranteed Return Plans”, “Endowment Plans” or “Money Back Plans”.
But the truth is that: These plans neither provide good insurance nor better returns!
The reality of traditional insurance plans:
a) Insurance and investment are mixed.
b) Sum assured is very low (up to ₹10-15 lakhs).
c) The return is only 5-6%, which cannot even beat inflation!
d) The premium is very high (up to ₹50,000 - ₹1,00,000).
That means neither proper insurance is being provided, nor good returns.
Term Insurance vs Traditional Insurance – Direct Comparison
If you want returns, then instead of investing in traditional plans, invest in:
✔️ PPF (Public Provident Fund)
✔️ NPS (National Pension Scheme)
✔️ Direct Equity (Stocks)
If you take a term plan for ₹12,000 annually and invest the remaining ₹50,000 in SIP instead of investing in traditional insurance, then after 35 years this corpus can become ₹1.4 crores!
That is – right insurance + right investment = best financial plan!
Should you take TRIPO (Term Insurance with Return of Premium) or not?
- The premium in TRIPO is high.
- If you invest the same difference in SIP, you will get higher returns
If a term insurance of ₹1.5 crore is available for ₹12,000, then the same TRIPO will charge ₹18,000 annually.
a) Saving of ₹6,000 If you invest ₹500/month in SIP for 35 years, then a fund of ₹27 lakh can be created!
b) Whereas in TRIPO you will get back only ₹6.3 lakh.
Better option? Just take term insurance and invest the rest of the money wisely!
Final Verdict – Which one should you take?
- For insurance: Term Insurance
- For investment: MF, PPF or stocks
Traditional insurance is just to block your money
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