Hi Sanjib. Why is a term insurance considered better than insurance that comes with annuities and bonus?

Ans: You are asking the right question.
Thinking about term insurance shows strong financial awareness.
It protects your family when you are not around.
This is a wise and responsible step.

Let’s explore this from all angles.

» What is Term Insurance?

– It gives a lump sum if the insured person dies.
– No money is given if the person survives.
– It has no maturity or return benefit.
– It is pure risk cover only.
– Very affordable when compared to other life insurance plans.
– It offers high cover at low premiums.

» Why Term Insurance is the Best Protection Plan

– Family needs protection from income loss if something happens.
– Loans, EMIs, and school fees still continue after your death.
– A good term cover helps family live with dignity.
– No other financial product gives this protection at this low cost.

– It is like a safety net for your loved ones.
– Without it, your family may face financial stress.
– Especially important if you have dependents or loans.

» Term Insurance is Not an Investment

– Term plans do not build wealth.
– They are not for returns or tax saving alone.
– Their only job is to protect your family’s future.
– Investment plans with life cover are expensive and confusing.

– Many mix insurance with investment.
– That reduces insurance cover and gives poor returns.
– ULIPs, endowment, and money-back plans are not cost-effective.
– Term insurance gives full focus to protection.

» Ideal Cover Amount and Policy Tenure

– Cover amount should be 10 to 15 times your annual income.
– It must also cover your liabilities like home or personal loans.
– Add future family needs like education, marriage, and retirement.

– Policy term should match your working years.
– Usually till age 60 or retirement.
– After that, your investments should support your family.

» Term Insurance Premiums Are Fixed and Affordable

– If you buy early, premiums are very low.
– Premiums remain same throughout the term.
– Late purchase means higher cost and health checks.
– So, buy when you are young and healthy.

– Example: A 30-year-old pays very low premium for Rs. 1 crore cover.
– At 45 or 50, premiums rise sharply.

» Additional Riders Provide Wider Coverage

– Riders are add-ons for more protection.
– Some useful riders include:

Accidental Death Benefit

Critical Illness Rider

Waiver of Premium

Terminal Illness Benefit

– These riders improve coverage at small extra cost.
– But choose only if you really need them.

» Avoid Investment-Linked Insurance Products

– Endowment, money-back, and ULIPs give mixed benefits.
– They are expensive and offer poor returns.
– They give very low cover for high premium.
– These plans confuse people between saving and protection.

– Always separate investment and insurance.
– Invest in mutual funds for wealth.
– Use term insurance only for protection.

– If you already have ULIP or endowment, review it now.
– Check surrender value and switch to mutual funds.
– A Certified Financial Planner can help with this.

» Direct Online Policies May Not Be Right for All

– Direct term plans may look cheaper.
– But no personal guidance or help in claim process.
– Errors in filling proposal form can delay or reject claims.

– Better to take regular plan through a Certified Financial Planner.
– CFP ensures correct policy selection and form filling.
– They guide family during claim time too.

– You are not just buying insurance.
– You are buying peace of mind.
– So, professional guidance matters.

» Term Plans Are Not Just for Men

– Women also need term insurance.
– Especially if they are earning or co-borrowers in loans.
– Even homemakers may be insured for family safety.

– Death of a homemaker brings emotional and financial cost.
– Replacing her role may need paid support.
– So, term cover for women is also important.

» Group Insurance from Office Is Not Enough

– Most companies give group term cover.
– But that is only 1 to 3 times salary.
– It ends when you leave job or retire.

– It is not portable or flexible.
– It may not cover personal loans or family needs fully.

– You must buy personal term plan outside job.
– That gives long-term, custom protection.

» Term Insurance Gives Mental Peace

– Once term plan is in place, you feel secure.
– Your family won’t face money trouble after you.
– You can focus on work and goals without worry.

– It is the backbone of your financial plan.
– No amount of mutual funds or FDs can replace it.

» Buying Term Insurance is a Responsible Step

– It shows you care about your family.
– It is a selfless financial decision.
– You may not get returns, but your family gets support.

– That is the whole purpose of protection planning.
– Insurance is not for you, but for your dependents.

» How to Choose the Right Term Plan

– Pick a reliable insurer with high claim settlement ratio.
– Choose proper sum assured as per needs.
– Avoid unnecessary riders if not required.
– Fill the proposal form truthfully and carefully.

– Disclose all medical history and lifestyle habits.
– Mention nominee details correctly.
– Keep family informed about the policy.

– Take help from a Certified Financial Planner.
– They can compare and recommend suitable options.

» Final Insights

– Term insurance is the most honest insurance.
– You pay for protection, not for returns.
– It gives your family a chance to rebuild without you.

– Do not delay this important decision.
– Buy term cover when young, healthy, and earning.
– Do not depend on employer cover or low-value policies.

– Do not mix investment and protection in one plan.
– Separate term plan for safety.
– Use mutual funds for wealth.

– Consult a Certified Financial Planner.
– Review term cover every 3–5 years.
– Update nominee and details regularly.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment