Life Insurance of Rs. 30 lakh costs Rs.5160/- in term insurnace and Rs. 190000/- in Endownment...!! which one will you go for?

Life Insurers give you a lot of options and fancy names for insurance like endowment. whole life, term, ULIP's etc but the fact is that only one form/type of insurance covers your need and is effective on your pockets too. and that is 'Term Insurance'

Term Insurance is a pure form of insurance wherein you are not linking insurance(risk cover) and investments together. People over the past with their so called advisor cum insurance agents have put a lot of money in insurance plans expecting a good return at the end. The way its portrayed by the agent is the numerical value of returns and not the percentage terms which should actually be the case, as Rs.100 today is only equal to Rs. 466 after 20 years @ 8% Per annum, So if your insurance gives you even 4 times your money that is Rs. 400 then too you are at a loss.

Insurance linked investments are basically of two types.
1) Debt investments:- Endowment, Whole life, most Moneyback policies,
2) Equity market Linked:- ULIP's and unit linked pension plans

Historically debt linked insurance products don't give more than 6.5% return over the term of the insurance contract and the problem with ULIP;s are that they are very costly as the agent gets upto 40% of your premiums as commissions and the management expense is also very high.

So if you want to separate investments from your risk cover then you should only protect yourself by a term insurance policy

Example:- To compare the two types of insurances

A Term policy for a 30 year old male for a cover of Rs. 30,00,000/- for a period of 25 years will cost around Rs. 5160/- pa where as an Endowment worth this will cost him around Rs. 190000/-pa

There is a cost Saving of Rs. 184840/- Pa which can be saved and invested as per your investment risk profile and asset allocation rather putting it for 25 years at around the average growth rate of 6.5%

This is why only Term Insurance should be bought and make investment into better yielding products as per your risk profile and time horizon.

No agent will ever tell you this as his commission income will be reduced drastically.