Is Term Insurance better then Life Insurance

Is Term Insurance better than Life Insurance, if you ask this question to the group of people they definitely go for Life Insurance and LIC. Why, because there is a possibility that they have not heard about the term “Term Insurance”.

Before comprising in Term Insurance and Life Insurance, you must aware of all the facts about both the segments.

When we talk about Insurance, two things “Investment” and “Life Cover” comes to mind.

Let’s start to understand both the Terms.

Life Insurance

Life Insurance is the segment in which you pay a sum of money on a selected interval basis like monthly, quarterly, halfyearly or annually, nowadays you also get the option of single premium.

The Premium is decided on the basis  -Period of Insurance and Sum Assured.

The Insurance company lets take an example with “Life Insurance Corporation of India” (LIC) will in return provided you Life Cover for the amount of Sum Assured and money back guarantee after maturity with interest and other Bonus benefits. (will discuss in details in next article) .

Two things are seen by the Buyer “Investment” and “Life Cover”.

You will also get the benefit of tax exemption u/s 80 C of Income Tax Act.

Term Insurance

If we talk about term insurance the concept is totally different, its work like vehicle insurance, on annual basis you pay a sum of money to the Vehicle insurance company, to keep your vehicle insured for the value declared as per vehicle valuation.

If there is some unhappening occurs with the vehicle, the insurance company will pay you the damages as per terms and condition.

The same concept will apply to Term Insurance, the premium is decided on the basis  -Period of Insurance and Sum Assured. and premium needs to be paid on same monthly, quarterly, halfyearly or annually basis.

If some unhappening occurs within the period of insurance, your nominee will get the Sum Assured.

On maturity, you will not get any Money back. So why Term Insurance.

Compare Term Insurance and Life Insurance

The major difference between Term Insurance and Life Insurance is “Premium”. Let’s take an example if a person goes for Term Insurance which sum assured of 50 Lakhs and the time frame is 25 years with the age of 30 years, the premium will be – around Rs 10,000/-,

On the other hand, if you go for Life Insurance with sum assured of 50 Lakhs and the time frame is 25 years with the age of 30 years, the premium will be – around Rs 3,00,000/-

The Difference is because you are getting cash back on maturity on Life Insurance. For more please refer https://www.licindia.in/Customer-Services/Premium-Calculator

Let’s Go deep

If you opt for Life Insurance for the same segment you are paying the premium of Rs 3,00,000/-, but you dint known is the insurance company distribute your premium in another two segments, one Term insurance and other is Investment.

The Premium goes for Term Insurance is Rs 10,000/- as we discuss above and rest of the money is invested by the Company Financial advisor, which will provide you money back on maturity with lower than Bank interest.

So, if you are getting the return on around Bank interest, why you yourself kept your money in Bank Account and just purchase Term Insurance from the company.

If you have some knowledge of Financial investment, you will get more then double return on the money you are about to pay a premium for Life insurance.

Conclusion

Never Link your Investment with Insurance, treat both Investment and Insurance separately and Boost your investment with Money Resolution 2018.

Before Purchasing Term Insurance don’t forget to see the claim settlement ratio, as there are several private insurance companies which attract people with very low premium but during settlement, your nominee has to suffer, which we don’t want to afford.

 

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