“We have no desire to make anybody look like a blithering idiot, but we do love it when they do. “ – Stephen Colbert . One of reason why most of the people do not take term Insurance is because “They don’t get anything back at the end” . In this article , I will show you why this is psychological issue. Even if you get your money back at the end of the tenure , it wont make much difference . In this article I will prove that the argument that “Term Insurance is waste of money because you don’t get anything back” is amazingly idiotic .
What is the main Issue with People not liking Term Insurance
Why people don’t like Term Insurance is the question , The answer is simple, because you don’t get anything if you survive the whole tenure and hence the amount paid as premium is wasted , this is claimed by millions . Fair enough . The first thing is , these people do not understand or appreciate the Importance of Life Insurance . Now lets see this situation from a different angle . Assume you get the money at the end in your Term Insurance . Lets see a case study of a general Family . How does a family look like .
Manish is 28 yrs old and got recently married (oops!!) . He earn close to 40,000 per month . His monthly expenses is around Rs 25,000 overall and he saves 15,000 per month (heh) . He also have his parents dependent on him financially . He is 30 yrs away from his retirement . He calculated his Insurance Requirement and it was close to 50-60 lacs minimum . Lets take it as 50 lacs for simplicity for now . Get more of Insurance Articles from Archives section .
Analysis of Case Study
Now is the fun part , his current monthly Expenses are close to 25k, How what will it be his monthly Expenses when he retires after 30 yrs ? So the average inflation for last 30 yrs was 6.5% (based on past data) , lets assume it will be 6.5% for next 30 yrs on an average . Then the monthly expenses after 30 yrs would be 25,000 X (1.065)^30 = 1,65,359 (1.65 lacs) . If he takes a Term Insurance at the start , his yearly premium per year for 50 lacs cover would be Rs 11802 for 30 yrs tenure from Aegon Religare . Do you know how you can do your Retirement Planning in 6 steps ?
Click to Enlarge
Which means , he is going to pay total premium of 3.54 lacs in his entire life . How even if he gets this money back at the end , How much will it benefit him ? How many months can he survive on this money ? 2 months is the answer !! , With expenses of 1.65 lacs per month , the money he gets back from term insurance is enough for not more than 2 months , Lets take maximum 3 months . That’s it !!! . Are you confused with Calculations, See this Video presentation by me where I explain how to do important Calculations in Personal Finance .
So Following are the questions needed to be asked
- Do you want to put your Family at Financial Risk because you are not getting 2 months worth of expenses back ?
- For a small amount you “don’t get” at the end , are you not being childish to Secure your family.
- Don’t you think you are seeing Term Insurance from a wrong attitude ?
- Are you not concentrating on “what you are not getting” rather than “what you are getting” .
We already have “Return of Premium Term Policies”, but they are themselves idiotic because they are again designed to just exploit the weakness of people who feel that term insurance is waste of money because they dont get their money back . Read this to understand why Plain Term Insurance is better than “Return of Premium Term Insurance policy” .
Reason why Indians dont like Term Insurance
Reason 1# : Most of the people concentrate on number and explicit data , like the money they are not getting back or its a waste of premium if nothing happens to them . They fail to look internal advantage which term Insurance provides
Reason 2# : We are emotional with Money , we are more concentrated with Growing money and getting money back rather than what value it provides in our life .
Reason 3# : Most of the people think that the probability of dying is much lower than an average person which is again totally idiotic . We just don’t want to visualise a bad situation and hence do not concentrate on that situation .
Conclusion
In life we don’t appreciate things like Health , small moments of happiness , nature , time spend with our loved ones which are most wonderful and real things in life. Term Insurance is one of the similar things in personal finance domain . You just need to shift your focus of view from “what you are losing” to “what you are getting” , once you do this with Term Insurance and your Life , Both with become wonderful .
Please comment on what do you think about this and do you agree with it . are you victim of such mindset ?
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{ 119 comments… read them below or add one }
what do u think about jeevan saral
of lic of india.
@Aravind
Its again a Endowment policy .. doesnt makes sense to me .
Manish
I tend to disagree not in the sense you have written about mindset but I disagree that term insurance is best one.
I will just give you my example. I have ULIP plan which gives 100000 insurance for every Rs. 1000 invested. And, if you are below mid 20's; that thing makes much more sense. Because you are ~15 years away when mortality charges of ULIP becomes more than term insurance. You can argue about next 10-15 years of term insurance where ULIP mortality charges are more; but even then if you do calculations then I bet taking term insurance at that time is much more beneficial (I am including more charges of term insurance at that time)
Here what I am going to do is: pay premium for 3 years and then stop investing in it. Put 2 times of minimum required amount in ULIP and invest remaining amount somewhere else (Keep doing this for say every 2 years). For remaining ~12 years, I have term insurance premium available to invest somewhere else.
After ~15 years of policy term; gradually reduce insurance portion of ULIP (or stop it) and increase term plan as per requirement.
This is not at all advisable if you are already in your 30's.
What do you think?
Sorry but which ULIP gives 100000 insurance on 1k investment…tell me …i invest 10k premium annually and i get sum assured 1k more than money invested so far
Nice one.
Manish I think taking 6.5% inflation even the total insurance amt of 50 lacs will be peanuts after 30 years.
What I mean to say is during 30-40 age a sum of 50 lacs makes sense..but 40-60 still u have only 50 lacs insured value ? I think it must be more…isn't it ?
@Manish I completely agree with you. See this post for more details on my comments Term Insurance – Advantages
@Anonymous. Read the above blog post. At any scenario, Term Insurance beats any other insurance. you should compare ULIP with Term Insurance + Mutual Funds and not just with Term Insurance.
Also, There are heavy initial charges in ULIPs which makes it a worst product. Given that, they have reduced the initial charges of ULIP now, it has become an average product now. But still, Term Insurance + Mutual Funds beat ULIPs by leaps and bounds.
Also, Always have the Insurance and Investments separately.
"Which means , he is going to pay total premium of 3.54 lacs in his entire life . How even if he gets this money back at the end , How much will it benefit him ? How many months can he survive on this money ? 2 months is the answer !! , With expenses of 1.65 lacs per month , the money he gets back from term insurance is enough for not more than 2 months , Lets take maximum 3 months."
I have some doubts in the calculations that you have done above. Can you post some details??
@Anonymous
Mortality charges for ULIPS are less than Term insurance ? Is it ? If thats true , it may be because mortality charges depends on age, gender and health and sum at risk . you also need to take into consideration some points
- If you your Fund value comes down and is equal to one year premium , your insurance cover stops and policy terminates .
- Mortality charges are proportional to Sum at risk , Sum at risk is "Sum assured – your Fund value" and mortality charges are deducted on monthly basis . If there is a bad time and fund value decreases then the mortality charge goes up and up marginally .
What you are saying may be correct but for a particular scenario . We should concentrate on Worst case always or atleast average case .
My motive was to exaplin why we should keep it simple and Term plan + SIP in mutual fund us a simple thing which everyone can understand .
@Vats
yeah , you are correct man .. Thats the reason we should increase the cover also as time passes , or atleast take insurance where there is option of automatic cover increase of 5% every year .
@Manickkam , Your article was good .. i read it .
@Excel Matic
sure , i will tell you how i did it .
So the yearly premium came as 11,800 per year .So his total premium outgo in 30 yrs would be
11,800 * 30 = 354000
Now we calculate his montly expenses after 30 yrs
Current Monthly expenses = 25,000
Inflation = 6.5%
Time = 30 yrs .
This will be calculated as normal compound interest formula
that would be A * (1+r)^t
= 25000 * (1.065)^30
= 165359
So his future montly expenses is 1.65 lacs where as he is getting 3.54 lacs (remember , we assumed that you get all your money back in Term insurance) , which is just 2 times of his montly expenses .
Let me know if you still dont understand , i will make you understand over phone or meet you in person if you are in bangalore .
Thanks for asking
, have a great day . See my video post on basic calculation if you need more .
Manish
Hi Manish
I have a couple of friends who always feel, its stupid to buy term plans, howevr i try to explain they dnt seem to understand. i stay in bangalore, can i bring them all and can you meet us and make them understand with your calculations
Jagan
What do they say when they read this article .. I am fine with meeting you guys and making you all understand that term makes sense . If they are not convinced , tell me . We can do something
Manish
Hi manish
do you stay in bangalore , i never know that I am also in bangalore
Hey Manish,
I guess, term insurance is only beneficial to persons who have someone financially dependent on him/her.
Im 28 years, not yet married, my parents does not depend on me financially – in this case should I opt for a term insurance?
AND
I am approaching 30 soon, should I opt for a term insurance since I guess that the annual premiums will increase once we are 30+ (Im assuming that I will get married by 30, hopefully.)
Thanks for ur time.
@Rahul
Not term insurance , but Insurance itself is not required if you dont have financial dependents .
However , you will soon get married , so it would be ok for you to go for Term insurance now for some amount, even though your parents do not depend on you , you might want them to get some good money incase there is any unfortunate event . once you get married , you can go for some additional cover then .
You can also wait till you are married. Congratulations by the way
Manish
Hi manish,
good article,
How to choose Different companies are offering life insuarnce at different premium rates of same some assured.
choose govt one like LIC or any other private one like ICICI,Aviva which is have less premium
is it required to go for 2 plans having less premium instead of single large premium
please suggest me…
–
Kiran
@Kiran
You can go to click2insure.in or insurancemall.in or http://www.apnainsurance.com/life-insurance-india/compare.html to compare life insurance .
There is no mandatory rule to break your Insurance in 2 , but it is recommended as it will diversify the risk of declining the claim by both and it will give more control to you to decrease your cover later by just stopping one of them .
Also , you can go for any company , no need to go for any one or be afraid of consequenses .
Manish
Two points: One, We all insure our cars and two wheelers where we don't get anything if there's no accident. It's pure term insurance and we don't debate minutely there.
Two, most of our financial advisors discourage people when it comes to term insurance. Unfortunately the hidden reason is low commission compared to endowment and ULIPs.
My feeling is people will buy term insurance if they are properly educated /informed. Which is against the business interests of our friendly insurance agents.
Wrong, the commission in insurance is higher than ULIP. 2000 Rs premium term insurance gives more commission to the agent than a 30000 Rs single premium ULIP.
What do you think which policy is sold and bought more?
The single premium one. Because it is easy to sell a 30,000 premium ULIP than 2000 premium term policy. Don’t just blame insurance agents.
dear all. welcome!!
It is true to say ulips give more death benefit than pure term plan.
Aggreed, but while selcting for such good ulips ,many many innocent policy holders fell prey to very greedy,unethical life agents.
for ex. DREAM PLAN from birlasunlife offers ENHANCED SUMASSURED if opted.it looks good on paper but i personally observed after seeing many account statements(I work as a agent),the policyholder looses more money due to other charges in the form of units.
so donot believe ulips after 3 policy years gives risk cover for your entire life FREE.seen personnally many polices lapsed in such cases due to lower fund value.
thanks
dear all. welcome!!
It is true to say ulips give more death benefit than pure term plan.
Aggreed, but while selcting for such good ulips ,many many innocent policy holders fell prey to very greedy,unethical life agents.
for ex. DREAM PLAN from birlasunlife offers ENHANCED SUMASSURED if opted.it looks good on paper but i personally observed after seeing many account statements(I work as a agent),the policyholder looses more money due to other charges in the form of units.
so donot believe ulips after 3 policy years gives risk cover for your entire life FREE.seen personnally many polices lapsed in such cases due to lower fund value.
thanks
@Ranjan
Nice points from you .. People buy other insurance because its mandatory
.. How about making Term Insurance compulsory for everyone 
@Anonymous
Why do you say that ULIP provide more death benefit than term cover . it cant be true i think , do you have data to show that ?
With the other points i agree with you
Manish
hi manish
nice article again,
point to keep in mind here is that insurance is not for us but for others(read dependents),
take care bro
I am going to purchase Term Insurance but still confuse from which company I will purchase ?
LIC or HDFC
who will settle claim easily ?
Another eye opening article.
Please accept my gratitude.
@Moneymanager
Yes , but people take Insurance as Investment products and thats the reason they feel that Insurance if for them and their family both
@Vivek
That would depend how authentic your claim is , If you are talking exactly about the time duration which is fast , I am not sure on that , but it wont be too different .
@Davon
thank you sir
Hi Manish,
Another thing I would like to point out is that, it looks like the agents themselves don't better commissions on Term insurance. I still remember how reluctant our agent was to get the paper work done etc. In fact initially he even acted as if he didn't properly know what it was and he kept on telling me 'no one takes this saar.. its just waste etc etc'. After I said i wont take any insurance from him other than term insurance, he started the paperwork etc.
Hi Manish ,
This is more of a question the comment .
I have got married a year back . My wife had a LIC endowment policy earlier (since 3 yrs ) for which she pays a premium of 25000 for sum assured of 5lakh . Now I have got her a term policy of 50 lakhs for which the premium is around 18000 per annum .
Should I discontinue the Endowment Policy , also Can will I loose the Premiums paid till date (around 75K)
@The Green Man
Yeah .. you are correct , The agents are more interested in the commisions they earn rather than the blessing of investors they get ..
Manish
@A Day
Nice .. Congratulation on taking such a decision .. by default all the LIC endowment policies work this way ..
If you have paid 3 year premiums after that they acquire a surrender value which you can take by stopping the policy , but this amount would be very less .. generally 30-40% of your Premiums paid + Bonus accumulated .
Or you can take your Premiums paid + Bonus accumulated till date at the end of the policy , which will be penneis are the end .. Its your choice now .. Getting in that policy was a wrong decision and getting out is even harder .
Anyways .. you have taken the best decision of taking term insurance , however just make sure that taking Insurance on your Wife life is right decision only if there are people who are financial dependent on her , incase there will be no impact financially incase she is not there.. even taking term insurance is a wrong decision
Manish
@Manish ,
Thanks for a quick reply . I guess I'll surrender the policy .
About the policy on Wifes name , though both of us do not have any other dependent for now , since we earn almost equally , i decided on taking similar policy for both of us
@A Day
If you people do not have Financial Dependents then better not to take Insurance for each of you .
I know some Insurance amount will help in filling up the emotional pain , but only that much part is logical to take . not more .. because loosing life is a very low probability event , most of the people do not even get anything from their Term Insurance ..so most probably it would go like that only .. I say this for you because in case one looses life , the other one will not be too much financially impacted , but incase one doesnt want other person to do job after one is gone , in that case Insurance will make sense ..
Its like doing something after understanding its impact .. you are smart I know
take your call 
Manish
@Manish ,
The reason why i started the insurance is that , though we do not have dependents now ,it will not be the case in few years when we choose to start a family .
My understanding is that the annual premiums will be higher if i start a policy after 5 yrs then the premium i have to pay now .
Please share your views .
@A Day
well if its 1 or 2 yrs .. then i would say its fine .. but if family planning is many years away , then you will be wasting premiums for initial years
Its true that later on your premiums will be higher , but you also have to keep in mind the premiums wasted initially .. If you take a 50 lac cover for yourself and your wife and pay 12k + 12k as premium .. you will pay 1.2 lacs in 5 yrs total .. now if you take it after 5 yrs and may be your premium rises to 15k and your Tenure is left 25 yrs more .. then you will pay 3k+3k = 6k extra for 25 yrs , which is 1.5 lacs .. but you also wasted 1.2 lacs in initital years .. so total 30k of profit in numbers terms (not real money value) .
You have to do similar comparison for your case , the numbers i took was just an example .. anyways .. i think we are thinking too much (which is good) .. If you have already taken it .. then better continue
Manish
"Heyy , Thanks for dsipelling many myths I had regarding term insurance, Thanks for that insight . It has really helped me understand a lot!
Have been searching for tutorials on how to plan for insurance according to my budget and needs, especially health insurance .. This tool came in handy too! Enjoy 
http://www.simpleinsurance.co.in
"
@Naveen
Thanks for the appreciation , however that link which you gave is from ICICI , and is of not much use other than some good user interface .. read more at :
http://blog.investraction.com/2009/09/fds-or-government-bonds-better-than.html
Manish
Manish can explain more and by example on first comment from Anonymous.How this can be achieve?
I tend to disagree not in the sense you have written about mindset but I disagree that term insurance is best one.
I will just give you my example. I have ULIP plan which gives 100000 insurance for every Rs. 1000 invested. And, if you are below mid 20's; that thing makes much more sense. Because you are ~15 years away when mortality charges of ULIP becomes more than term insurance. You can argue about next 10-15 years of term insurance where ULIP mortality charges are more; but even then if you do calculations then I bet taking term insurance at that time is much more beneficial (I am including more charges of term insurance at that time)
Here what I am going to do is: pay premium for 3 years and then stop investing in it. Put 2 times of minimum required amount in ULIP and invest remaining amount somewhere else (Keep doing this for say every 2 years). For remaining ~12 years, I have term insurance premium available to invest somewhere else.
After ~15 years of policy term; gradually reduce insurance portion of ULIP (or stop it) and increase term plan as per requirement.
This is not at all advisable if you are already in your 30's.
What do you think?
@Yogi and @Anonymous
I am not sure how paying 1000 for 100,000 of insurance in ULIP justifies that its better than Term .
In Term Insurance , you get 10 Lacs of cover in less than 2,000 for a mid 25 yrs old person .. with this ULIP it will be 10,000 .
Btw , I would like to know the name of the ULIP so that I can investigate more ..
Manish
Hi Anonymous,
Can u share ur ULIP and how this can be achieve which is mentioned in first comment by u.
better explain by some example.
I tend to disagree not in the sense you have written about mindset but I disagree that term insurance is best one.
I will just give you my example. I have ULIP plan which gives 100000 insurance for every Rs. 1000 invested. And, if you are below mid 20's; that thing makes much more sense. Because you are ~15 years away when mortality charges of ULIP becomes more than term insurance. You can argue about next 10-15 years of term insurance where ULIP mortality charges are more; but even then if you do calculations then I bet taking term insurance at that time is much more beneficial (I am including more charges of term insurance at that time)
Here what I am going to do is: pay premium for 3 years and then stop investing in it. Put 2 times of minimum required amount in ULIP and invest remaining amount somewhere else (Keep doing this for say every 2 years). For remaining ~12 years, I have term insurance premium available to invest somewhere else.
After ~15 years of policy term; gradually reduce insurance portion of ULIP (or stop it) and increase term plan as per requirement.
This is not at all advisable if you are already in your 30's.
What do you think?
Dear Manish
I want to know about new ULIPs plan like BSLI platinum plus IV & ICICI pru pinnacle which says guaranteed returns as per HIGHEST NAV recorded in 1st seven from lauching date. How much better they are when compared to mutual funds?
Regards
Vikrant
benefit os icici pinancle
Avail the highest NAV recorded on a daily basis, in the first 7 years of the fund, at maturity.
Gain from an additional allocation of 3% of your fund value, at maturity
Pay premiums for only 3 policy years.
th Enjoy liquidity with Partial Withdrawal facility from 6 policy year onwards.
Get tax benefits on the premiums paid and benefits received under the policy, as per the prevailing
1 Income Tax laws .
Thanks Yogi for giving me the details. Should I go for it? If yes then which one would u refer Birla sunlife or ICICI? My preference will be based on growth of fund since I cant wait upto 10yrs. After 3yrs when I will feel that current NAV is quite profitable then I may withdraw.
Regards
Vikrant
@Vikrant
Truly speaking , Even though I have not evaluated the policy , I am not very excited by this policy , I cant comment on it right now .
But if your time horizon is 10+ yrs , I would say the best thing would be a SIP only. Let me find some time to find out how this policy is .. No promises
@Yogi
thanks for providing the inputs
Manish
Thanks Manish
As far as I know these plans are some sort of SIP (??Please go thru plans I am not sure)since we have to pay our premium monthly except the 1st premium which is necessarily to be quarterly/half yrly/yrly. Plus piont (as told by agent) is that 1.)one can withdraw after 3yrs when u feel that NAV is at good price 2.)Switching over to diferrent kind of investment option as per market condition to avoid losses 3.)If u wait for 10yrs i.e. maturity ur earned units will redeemed at highest NAV locked during first 7yrs. Require ur help to take decision.
Regards
Vikrant
@Vikrant
Truly speaking I will take time to review policy . Policy review is the last thing I like and I have many more things on my plate right now . So try to understand the product yourself for now . Read more about it on net.
thanks for understanding
Manish
Hi Manish,
I am really impressed about your explanation regarding the jeevan Tarang policy.
So could you suggest some heath insurance policy for old people 57 yrs (Father), 5oyrs (Mother) and 25yrs (daughter)
Regards,
Vinod
@Vinod
Its little tough to get a Health policy for a 57 yrs old , The Premiums are going to be really high ,However you should look for a policy at apnainsurance.com .
Manish
Hi Manish,
Kudos to you for doing this great job of enlightening us with your financial planning tips.
I have a query. I wish to have a Term insurance plan for myself for 30 lacs for a period of 25 years. I have zeroed in on SBI Life and Aegon religare.
I have trust in SBI Life as it is there since more than 8 years now . However, Aegon religare has the lowest premiums i have ever seen for a term plan. But, it is just a year old. Do you suggest Aegon religare considering that it does not have any track record ?
Also, recently i have seen a new plan called ‘iTerm’ from Aegon Religare which is even more cheaper. What do you think about this plan ?
I also have a plan to split 15 lacs each among SBI and Aegon Religare if you suggest Aegon religare.
Let me know your views..
Thanks
iTerm is really best right now .. I am coming up with a post on it in some days . SBI and AR both are good companies.. I feel you can go with iTerm , not at all an issue
Manish
Thanks Manish..
On doing further analysis, i found that there is a term plan from Aviva called Aviva Life Shield Plus , for which the premium is lower than Aegon Religare’s level term plan if SA < 30 lacs, though the new iTerm plan now, is the lowest.
How do you rate the Aviva Life Shield Plus term plan ? Also, how safe and reliable is it to apply for iTerm plan online?
Thanks in Advance,
Shantharam
Go for the iTerm plan , There is nothing wrong with online buying , India is now moving to ecommerse so fast and in coming days everything will be online , Not an issue
. Aviva premium may be cheap for some age groups but not for all . I have nothing personal with them , but its like AR philosophy is great and they have an attitude towards Insurance 
Manish
Dear Manish,
I am really impressed with your reviews. I would like to know if I go with Birla Sunlife HNWI Plan for Term Insurance Plan for 50L is it good plan?
My age is 30 completed years. Please reply.
.-= Nilesh Panchal´s last blog ..IILM Institute for Higher Education =-.
All Term Insurance are same .. Nothing much different apart from the claim ratio .. Make sure you split your insurance and its cost effective to you . Take some iTerm
Manish
Nice article dude.
Thanks Ajay
Hi Manish,
I am planning to buy a Term Plan and had zeroed in on HDFC Standard Life. Recently, I came across another plan, a ULIP plan from Birla SunLife namely Birla SunLife Dream plan. This plan assures some maturity benefit. Do you think it is a good option to go for this Dream plan? The annual premiums for both, the term plan as well as the Dream plan are more or less the same. In this mail trail, someone has commented about the Dream plan and suggested that it is not a good option. But, as compared to a normal Term plan, there is at least some assurance of partial money back. What do you suggest?
Thanks in advance.
Devang
It would be tough to have a look at the policy as a whole, i am yet to look at it
But my recommendation would be to go for Pure term plans . Its like your say something is more pure than water as a natural drink , may be !! .. but hard to beleive and very less chances (almost no chance) . so stick with term insurance .
Manish
Devang, What about the sum assured ? Are they same as well ? Generally the sum assured for Term plans is higher and the premium is lower and the sum assured for ULIPs is a multiple of preimum paid (with market risks). I dont want to die (no one wants) and that too especially when the market is down. Think over this, do some homework and make an informed decision so that one doesnot have to repent from heaven
.
Good luck and Jeete raho
Manish,
Thanks for your input.
Ajay,
You see, I inquired about a cover of 1 crore. Any Term Insurance would have a premium of around 17k-19k annually. I am still to check the Aegon Religare plan. The Dream plan from BSLI is charging a premium of Rs. 21600 annually for the same cover. But it promises to give back around 1.27 lac @ 6% returns and 2.5 lac @ 10% returns. Whereas in the case of pure Term plan, we all know return is 0.
Comparing the premium of the two, I have to pay around 3k on an average more annually, which I think is manageable.
What do you think?
Devang,
I am not sure if I am doing this right, but here is what I did on the BSLI website for the Dream Plan Illustration page
1. My age is 31
2. I entered the Guaranteed Maturity Option as 100%, Guaranteed Maturity Benefit as 100,000, Benefit Term 25years, Investment Risk Option – Protector and Yearly pmt freq, Enhanced Sum Assured as 1 Crore
3. When I calc the premium, I got premium as 25,108.00
At the end of 25 yrs, if I am alive I get 164,740 @ 6% and 329,861 at 10%.
Moreover the fine print says some part of this may be guaranteed and some part variable.
Aegon Religare says 1 Cr SA is at 11k per annum where as Anmol Jeevan from LIC is 44k :O
Ajay
dont get into this .. better go for plain term plan + PPF + MF
Manish
Hi Manish,
Hope you are doing good, I need your help in tax planning. I am 32 years old, earning 65,000pm. I currently want to invest 3000-4000pm in Mutual Funds, Open and invest 20000pa in PPF and 10000 pa in Term insurance. I want 1,00,000,00 life cover and sufficient money for my retirement. I am already covered 40,000,00 from my Bajaj Allianz UNITGAIN and Max NewYork Whole Life(With waiver, I have to pay till 55years of age) I am paying approx 44,000pa in all thease as premium. Can you please rebalance my investment and help me to reach my target for Sufficient Life cover and Retirement. And any other suggestion.
Thanks in advance
Brij Mohan
.-= Brij Mohan´s last blog ..DevWeek 2009 Slides And Source Code – Guy Smith =-.
Brij Mohan
Financial planning requires a lot of other inputs and its not a minutes job . So I would say you should hire a financial planner , Dont refrain from paying him his fees. It would be worth the cost .
For basic advice . Take an iterm cover for 1 crore becaue thats what will come in your budget of 10k PA . Better surrender your ULIPS and start systematic SIP’s in mutual funds and ETF’s . Also expose your self to GOLD etf’s .
Keep ULIP’s only if you can use the switching facility efficiently .
Manish
Thanks a lot Manish.
.-= Brij Mohan´s last blog ..DevWeek 2009 Slides And Source Code – Guy Smith =-.
Dear Manish,
I am 33 yrs old & currently earning 27000/- per month after taxes. I have investments over stock market worth about 12 lacs. I don’t have any other investments or insurance covers. I would like to know from you, which’ll be a suitable insurance plan for me.
&
My father is 60 yrs old, earns 1.5 lacs P.M. Will he be able to take insurance, if so which plan will suit him?
Regards,
Rajesh
Rajesh
Who is financially dependent on you ? If there are , then you should be insured to an extent which can fill in the gap which you would have provided , see : http://www.jagoinvestor.com/2009/11/how-much-insurance-cover-is-enough.html
Regarding your father , there are two things
- Who is financially dependent on him ?
- How much earning capacity will be lost if he is not there and do you need to get lumpsum when he is gone ? I think he must have made most of his wealth by now and it wont be a good idea to insure him . The premiums would be really very high now .
Manish
Hi Manish,
Nice article exploring the myths people have and makes sense.
what are the best investment choices for NRIs? your advice will be appreciated
regards
Subbu
Hi Manish,
Thanks a ton for all your advice. After going through all the articles and discussions on this site and applying some common sense, i just bought a 50L i-Term policy from Aegon Religare. Now looking to buy another one of equal amount from SBI or LIC.
But i still have few questions:
1. SBI Life shield has options to choose for sum assured increment by 5 % every year or 50% every 5 years. But in my opinion this doesn’t make sense because, as your age increases, it’s obvious that your accumulation of wealth also increases and hence may require “less” sum assured. This means, there should be a term policy which will reduce the policy amount as life progress. The advantage with this kind of policy is as your age grows, the amount of premium you need to pay will also decrease and hence less burden. What’s your opinion on this?
2. Accidental death benefit. I’m still confused about this benefit. If i do NOT opt for this benefit rider, does it implies that i will NOT get any sum assured for a term assurance policy upon death due to accident?
Thanks in advance
Vijay
Vijai
1) It depends on your condition and personal income growth levels . There are people for whom 5% thing works and for some it does not . So it it does not work for you , you should not take it . Its like we have different options , one has to take it if its fits or see some other thing .
2) No its not like that . You will get sum assured even without that benefit , Accidental has other features also like in case of permanent and partial disability you get money and on death you get extra money .
Manish
Manish
Hello Manish,
Hope u r doing well.
I want to go for term insurance plan and compare the quote on policybazar.com also and found the iTerm plan is the cheapest. My query is as under:
1.I want to go for 50 Lacs insurance, would be good to go with one company only?
2.Any idea whether it covers terriorist attack ?
3.Maximum 25 years only?
4.I have heard about Star health insurance for senior citizen? Can give idea how it is?
Dharmendra
iterm is the cheapest one , but the claim ratio of company does not look good at the moment , hold on on this one .
the policy is for max 25 yrs old by design , not sure if they cover terrorist attack .
Manish
Hi Manish,
I am looking for a medical insurance policy for my brothers family. In his family total 2 adult and 2 childerns. I am looking for a flotter policy upto 4 lacs. And looking for less premium with maximum benifits. My brother’s age is 30 years.
i enquire with a agent, he suggest me Reliance health wise silver plan, where premium is very less. i also check star family health optima and united policy. But i am totally confused with all these policies.
Can you please advise me which policy is good for family, which will give good benifits. i am not only looking for less premium only, i can pay bit much but needed a good policy. because this is one time we have to pay. And also know that we have to go for private policy or govt one.
Please help me in this..
Waiting for your response.
Regards,
Naveen Mittal
Naveen
Make sure you dont compromise with the features of the health insurance policy for the cost. Its fine to pay more but make sure you get all what you desire , we buy for getting features , not less cost .
Also , note that you will not get any tax benefit on this as you get benefit for premium paid on spouse , child , parents , that it
check apnainsurance.com to do your own comparision .
Manish
Your post is amazing for those how don’t want to even think about life insurance. Its true that most of people think the same way u have written. People feel that if they don’t die within the term there will be no benefit. But there can be other reasons for not investing in term life insurance. In India most of the people are having hard earn money, they don’t even want to waste a single earned money. So if a company ensures them, that after term gets end they will get all paid premiums back, most of the people would love to invest in term life insurance. And if you will look from companies point of view, a company can easily invest his paid premiums and earn interest on it. So this way both can be in win win situation.
As you said people are not taking insurance just to save 2 months salary, i want you to think in this way that why companies are hesitating to pay such a small amount to their loyal customers.
Yogesh
thanks for your comment
. But the thing is that investors can use that same extra premium they pay for “return of premium” policies and then invest it in better way . look at : http://www.jagoinvestor.com/2009/04/return-of-premium-term-insurance-is-it.html
Manish
I hope u understand this time
Yogesh
Yogesh
that does not make sense actually for the insurance companies , So its like this , you go to a restaurants and order food which you did for so many days and suddenly you are asking them to add a dessert to that whole package at the end with same price , so you are asking them to reduce their profit margin and benefit you directly , that does not make business sense to Company .
If they are going to return the premium at the end , they are going to charge for it for sure .
Am i clear ?
Manish
Is there a term insurance that i can take in joint between me and my wife, so that is anything happens to one of us the survivor gets the money? I am 32 yrs old.
Nadesh
There is no term plan like that !! . there is one LIC policy called Jeevan something , but thats not recommended . Better to take seperate ones .
manish
I think companies can make profit out of the premiums paid by an insurer during the term. The profit margin would be very less but certainly companies can make profit. Insurance and hotel industries are two different things, how can you compare these two. In insurance the chances of death is very rare, so profit margin is very high.
If companies really want to attract their customers they have to come up with some plan in which both will get equally benefited. I think you are thinking only form company point of view, try and implement same on yourself and think that if you are buying the same policy, you will get the answer.
I don’t want to involve in any debate over here, it just the way i think.
Yogesh
I dont think Companies would do this atall .. Its would be a substantial thing to do , with same insurance premium , giving back the premiums back at the end , is not feasible from business point . they will go in loss in that case . They have to increase the premium otherwise they wont be able to generate the returns so much that they can pay back , its not feasible business wise .
Manish
I know its difficult for companies to launch such policies, but with the current competition in Insurance industry, you never know. I totally agree to your point but still i would like to see some plan in future which can give more reliability to customers and help them to plan their financial obligations with least expense.
Yogesh
Hi Manish,
I am about to take the Term Plan but my Insurance Agent advised me to go for Jeevan Saral. What is your view on this? How can we compare Term Insurance with Jeevan Saral. Agent tells me that you will get returns in Jeevan Saral
Please throw some light on this
Nilesh
For now , say “go to hell” to your agent and take term insurance , we will look later why it makes sense
also , try to analyse Jeevan saral from returns points , use IRR to calculate returns , see my IRR post .
Manish
Hey Manish,
I am still in the spree of reading your earlier blogs, so hence here I am asking you one more Qs.
I tried the click2insure.com site but there is some problem, it just shows the page with the phone number for assistance and nothing else.
Thanks
Kavita
it says “This Site Is Under Construction and Coming Soon.” . For now i would say use apnainsurance.com for any thing related to insurance .
Manish
Hi Manish,
ULIPs are good for people who knows nothing about the importance of insurance and often neglect the premiums and lose their insurance cover. They don’t read blogs (what are these) and don’t know what is a financial planner but controls a lot of money.
The percentage of these type of people is huge in India. ULIPs have one advantage though over term plans. The mortality charges in ULIPs depends on the age and increases every year which is like yearly renewable term insurance plans which are available in western countries. With this ULIP is a smarter choice than going to level premium term insurance where a 30 year old will be paying much higher than what his actual life risk is.
The commission is high because unlike MF, ULIPs are sold not bought.
Venkat
I agree with you oveall , the mortality in ulips is low , however they are subject to increase every year unlike term insurance , so from long term they should be at the same level ? No ?
Manish
@ Venkat, At last I have found somebody who sees the benefits of yearly renewable term insurance. No body, including the stalwart Financial planners appearing on the business channels, have understood this concept. ULIP’s do provide this benefit. But any body & every body seems to advice to drop a ULIP like a hot potato.
I maintain that any prudent financial plan should include a combination of Term + Whole lIfe + ULIP for life cover. The % allocation will depend on the required cover and the available surplus. This combination gives the benfit of affordability, adequate cover, flexibility of premium deferment, holidays &, withdrawals along with tax free pension and a estate for dependants.
Good work . appreciate your good work to spread good knowledge on Term insurance . Keep it up
Regards
Manish
Hi Manish,
Thank for the great work that you’re doing in spreading awareness and right information. I read each and every questions and ur replies and answered many of my doubts too.
However, I have a specific query and would be glad if you can reply. I am 30 yrs old, married and have daughter who is less than a year old. I already have couple of LIC policies totalling to a paltry 3.5 lacs Sum Assured. One is mine (sole) mostly Jeevan Anand (i guess) and other is with my wife, which is LIC Jeevan Saathi.
However, I have rightly decided now to go for a term plan for my long term insurance and decided to invest in MF + PPF for other returns. (read investment) I have come to know of a very good (longest age cover) term plan from Bharti Axa called Elite Secure. It has an option of “upto Age 75″ insurance cover. The premium for a 30 yr. person like me is Rs. 9825/- for this 45 years of life coverage of Rs. 25 lacs. With a 20 lac more rider of accident, the premium with tax etc comes to approx Rs. 13800/-. I also read about ur iTerm comments and visited Religare Aegon’s website and saw all its details. It is definitely cheap and value for money. However, I think the 75 yrs coverage that I am getting in Bharti Axa is very unique and not seen elsewhere.
What do you suggest for me in Term Plan? I am well aware that dependency on my income will be reduced after 60 yrs or so… However, a thought comes to me that chances of normal death will also increase post 60 yrs. (barring accidental death) and upto 75 years. So, this 75 yrs cover seems more practical in that case.
Can you please and help me decide whether this plan is worth going for or not? (Also, after 60 yrs, rider benefit as well as premium goes away, so I pay again 10k approx. premium per annum after i reach 60 yrs… in the year 2040!) I think I can easily manage 10k that time as its value would be really less.
Hardik
Looks good , You can choose this plan . However dont you want to split the insurance in 2 companies ? You can also take cover just for 60 yrs , what difference will it make if you go for 60 yrs or 75 yrs , anyways no one will be Financially dependent on you after 60 .
Manish
Thanks Manish for the quick reply. Yes, I also think splitting the insurance between two companies is a good idea as per that logic and atleast one company can pay the SA if the other one does not or takes undue long time. I will be taking two term plans as and when I am sure with my decision.
Yes, I agree that no one will be financially dependent on me after 60 or maybe after 65 at the most. For that matter, even my wife is working since long and plans to continue her job/career. And presently I have dependent parents and my kid daughter as a dependent. Even father is currently working elsewhere post his retirement. However, I read an article in Outlook Money and even in general it is said that taking the life insurance for the longest term is the best option. What is your take on that belief?
Secondly coming back to iTerm of Religare Aegon, though I consider myself quite net-savvy and forward looking, I still feel a bit insecure taking that policy online as the doubts do crop up in back of my mind regarding the reliability of that company and its long term prospects… Agreed that all ins. cos. are backed up by IRDA, but who knows what is the situation say after 25 or 29 years from now!! (If I take a 30 year plan) By the way, do they have 35 year plan in iTerm? Because I prefer a term plan till 65 yrs of age rather than 60.
Hardik
@manish, I heard a programme on BBC after a hurricane created a havoc in USA. The insurance agent was lamenting that people avail health insurance or fire insuirance and at the end of the period feel sad that they have lost their premium; unknowingly implying that they would have been happy if they had fallen sick and claimed from their medical policy or that their home / office / godown had caught fire so that they could have claimed from their fire policy. They don’t seem to be happy that they have not fallen sick or that their belongings have not been lost in a fire.
Same applies to TERM policy. They don’t seem to see the financial security of their family during the policy term; they seem to only concentrate on what they lost. Sad is’nt ?
Sunil
definately , Most of the people ask what do they get from term insurance , for them “getting something” is equal to “getting money back” , however they never think about what they are getting as “peace of mind” , “protection” etc .
Manish
Hi,
I was planning to invest in Aviva New young scholar child education plan as one of my friend has already taken for his child’s education. It seems pretty good. Also i checked the Aviva Educost tool and it seems i might need around 80 lakhs for my child’s further studies. He is only 5 years old now!
Please let me know anything you know about it
Thanks
Girish
Girish
We at this blog do not recommend ULIP’s . I think you can plan for it yourself using mutual funds , have a look at archives
Manish
Hi Manish,
I think you have missed out one of my comments above (no. 92)… pls. reply to that.
Thanks & Regards,
Hardik
If someone regularly invests in half the requirements of insurance in term insurance & half in sip directly in stock market for 15 to 20 years, one will get 15-20% returns surely, the data suggests.how that kind of working is.
NImesh
Its not clear what you want to say ? Also just keeping investing and not checking the investments and not using strategies like asset allocation and rebalancing will not help much , there are times when even 10 yr time frame like 1992-2002 have not been of much help in equity .
Its dangerous to make general statements everytime
Manish
Hi Manish,
Thanks for this great blog. I was actually planning for a term plan for Rs. 25L/25yr of iTerm-AR. My present financial status is as below:
My Age: 39yr, Income: Rs.68K/pm, Home Loan: 26L/20yr (EMI: 25K/pm), Auto Loan: 4L/5yr (8.5K/pm). I had taken LIC of 5L Endowment Policy (Rs.1.7K/pm premium) 10yr back maturing in 2030 (58yr).
Can you please suggest me keeping in view of all my EMI/Expenses (I have two dependants- spouse & girl baby 5M old):
1) Should I go in for a term plan? If yes, amount/term/which company?
2) Should I surrender my existing LIC policy & club with term plan?
3) Any children plans & retirement plans need to think of?
Thanks & regards,
Munna
Munna
1) Run !! get term insurnace of atleast 1 crore , just after reading this Point 1 .
2) Run again !! . Incase you are reading it , make sure you surrender your LIC
3) If you have not run yet , no need to run now .. Children and retirment plans are mainly ULIP’s . stay away from those for the reasons which I would encourage to find in this blog
Manish
Hi Manish
Is the Term insurance comes under any tax savings sections.
Thanks,
Madhu
Madhu
Yes
Looking for ur suggestion: I took LIC Term policy 3 yrs back and as a second one looking to take REligare’s. In addition to these term policies and health insurance policies, I heard there are policies for accident/disability too? Can u throw some light on those and whats the best among the available policies? I believe term life ins + health ins + acc/dis ins are required to cover 100%.
Chaitanya
You can take stand alone policy for Disability/accidental insurance or have it in term of rider from your term insurance .
Manish
Hi,
great article .
Here i have question?,
Is there any where i can look into the analysis of the term insurance(not including other insurances) claim ratio, which insurance company is paid more claims in case of term insurance?
Bal
As far as i know , we dont have that data seperated out from overall insurance claim ratio figures .
Manish
Hi Manish,
Is it advisable to go for one term plan of 1Cr. or split it into two? In that case my premium will be high. If I opt for one term plan of Aegon Religere for 1 Cr, how is it? Is that company reliable? Or should I go with LIC?
Please advise.
Thanks & regards,
Munna
Munna
For now you can avoid AR , you can reconsider them after some time , You should split your insurance with two .
Manish
I have taken the term insurance from SBI after waken up by jago investor ( 2 month before My B’day
)
As a eye witness, the branch staff who who accepted my form signed on that. I am wondering whether it is fine or it should be some friends or relative who should sign as eye-witness. Just want to know what is the role of eye-witness eye here. I am asking coz it is 30 year agreement. so better to ask random thought of my mind
Balbir
Hmm. I am not sure on that actually , but havent heard about this eye-witness thing:)
Manish
Recently I logged a request in Apana Paisa for a term policy and I explicitly mentioned that I am looking for a Term Policy.
However one of their agent called me and informed that “Bajaj Allianz Invest Gain Platinum” is a like term plan which give insurance cover for 40 years if you pay premium for 15 years. In fact you will be insured for X rupees in case of you demise the your nominee will receive a claim of 4X rupees.
While SBI Life shield term insurance is charging 10k for 35Lacs SA + 20Lac ADB for 25 years for a 27 yr healthy individual, this policy from bajaj Alliaz is charging nearly 33K. However Bajaj is providing an extended period for coverage 40years which no one else is giving.
So my queries are -
1. is this product from Bajaj Alliaz is a term plan, becoz it is also promising survival benefits.
2. Is there any fine print that I am missing here.
Let me know your views.
Patro
The term plan from bajaj is called Term Care : http://www.bajajallianz.com/BagicNxt/bajaj_home/products/life/term_care.htm , InvestGain is a ULIP
Manish
Thanks Mashish,
I categorically asked him whether it is a ULIP, he said it is a traditional policy but also has benefits of Term Policy. Do you have any link which shows it as a ULIP policy?
Also, what is your view on the other query?
I think I made a mistake , this seem to be a different product but not exactly term insurance, its a kind of return of premium term insurance kind of thing .
Manish
Dear Manish
It’ very very impressive and eye-opener article regarding importance of Term Insurance Plans. Anyone can say after reading his article it’s not a wastage of money.
Raman
I am glad you liked it
. Send it to all your friends
manish
Every insurance policy will have a mortality premium. Return of Premium Policy will charge extra premium, over and above mortality premium, invest in market and return this extra on maturity. You still not get what you paid as basic mortality premium.
Term plan has the benefit of higher cover at a nominal premium.
Hence Best Buy.
Invest extra money in stocks. Have trust in your wisdom and ability to invest your money to derive maximum benefit
Sanjay
Short and wonderful comment , it has all the knowledge in 5 lines .. great
manish
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