November 12, 2010 10:13 am
plz let me know about whole life insurance.
is it better than term plans…
Term Insurance is easily the better option if you compare the benefits. You should defintely go for it. Also nowadays most of the insurance companies have their term insurance plans which you can check out. I am sure you will like it.
I personally have invested in ICICI’s iProtect recently after going through the review out here https://www.jagoinvestor.com/2010/08/review-of-iprotect-term-plan-from-icici-prudential.html
All the best!
thanks for you time to ans my query…
can you elaborate whole life plans….a little bit..
like how they work???
and give me name of some best whole life plans @ lower premium..
thanks once again
All insurance plans are a combination of ‘security, and ‘savings’ part. Depending on the product the combination of/ or proportion of / percentage of these two elements would vary. For example in a term plan the security is 100% and the savings part is 0%.(Actually there is a saving element inside a level term plan but that is available to the insurer not to you!) In a pure endowment product- which is a pension product and which works exactly opposite to a life insurance policy i.e. money paid in lumpsum only if you survive the tenure- there is 100% savings and 0% security part.(Again these pure endowment products are not offered by insurance companies. Pure endowment product is different than an endowment insurance product. The typical pension plan also has some element of security apart from savings!). So for academic sake let’s say a FD-fixed deposit is a plan where 100% savings and 0% security is combined. Now these are the two extremes of the product spectrum and all other insurance products lie in between .
If we start from maximum security end from left hand of this spectrum and move towards right side of the spectrum where maximum savings part products are placed then how is their relative placement?
First term plans, then term plans with limited pay option, then term with return of premiums, then would the wholelife, after that limited pay wholelife, followed by endowment, limited pay endowment, then moneybacks and finally limited pay money, followed by pension plans in the end at the right extremity of the spectrum.
Now just remember every product is same in the sense every product has a particular balance of savings and security and we have to choose that product or product combination which is suitable for our particular need of cover, features we require and the budget we can allocate for insurance planning. But every product is going to give us some benefit on security and some benefit on savings side. The products are NEUTRAL. There is nothing which can be said as good or bad in vaccum. How they would work in a particular situation or HOW to make them work for our specific situation is more important.
These decisions should be never be of this type- buy term and invest the rest! Because when we invest we are splitting the whole budget again into security and saving. Can we create a better situation than keeping it combined in the product? The answer is an emphatic NO! (Whatever you might have read so far about eulogising the term plans; and whole of your insurance planning is to be attempted trhrough term only is a wrong conception which unfortunately majority of financial planners are promoting.)
I started writing this because I found you had posed two questions regarding those term plans whose cover would end @ age 53 and also you have posed a question regarding utility of wholelife plans. I just thought that here this person may give a patient ear to what I’m saying.
Amarjit, I’m running short of time. Would complete the write up tonight. Till then …..
(Personally I just love wholelife plans. They provide the most sensible balance of savings and security. Are great products where you can really think of insurance as an asset! They are great insurance planning tools in a moderate budget. They provide the real kick to the insurance portfolio as they can increase the asset value i.e. cover near the inflation rate and so much more!)
I hope I haven’t made this too heavy for you!
If your purpose is insurance, certainly, term insurance is better. You can get risk-cover at throw away price. Whole life policies are generally endowment plans, with low return and with less insurance at the same price of term insurance. Do not mix investments with insurance.
Hope it will help you.
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