Well lets start with a very basic question? Why do we take insurance policies ? Is it for insurance sake i.e cover the risk of loss of the asset insured, or is it for investment? Or is it for both? The answer to this could be all three.There are people who buy it just for insurance sake, while some buy it for investment purposes, while some others see it as both as an investment & insurance tool.So which is the right way of approaching insurance? Friends, insurance polices are meant only for insurance sake & NOTHING else. Get this very clear. It is NOT an investment tool, at least not an effective one.So first thing to do is to buy insurance only for insurance sake. And one must have insurance in his portfolio as it is the most important hedge against any eventuality that might rock your finances. Now, that its clear that we need an insurance plan which actually serves to meet the “insurance” promise, which policy should we go for ? Basically there are only 2 types of insurance plans ie. endowment & pure term plans. The plan to go for is TERM INSURANCE only.
Term Insurance is the basic insurance policy which seeks to provide life cover to the subject insured at a very nominal premium without offering any survival benefits.Some people might ask this: Now if it does not provide survival benefits , how is it better? Don’t we end up losing all the money we paid if we were to survive?Lets try & understand the reasons why term insurance is the only insurance plan you will ever need to buy.1. Meets the need for life cover at the lowest possible premium – Term plans offer you life cover at much lower premiums as compared to endowment plans. For example,LIC Anmol Jeevan Term Plan, the premium for a 30 year old male, SA of RS 20lakhs & for 20 years is Rs 7578 annually. While if the same person was to take endowment plan of Rs 20 lakhs the premium would be Rs 95910.Need I say more? Just see the difference.2. Lower charges than Endowment Plans – The biggest disadvantage with endowment plan is its ridiculously high cost structure. Conversely, the biggest advantage of term plan is its low charges.Article Source: http://EzineArticles.com/2090050
