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We compare the term life policy of a leading insurer to the money back policy of the same insurer to illustrate why term life policy works better for you. In both cases we take a person born on 1/1/1981 (30 years old) as our example. We take a tenure of 25 years for both and sum assured of 50 Lakhs, assuming the income to be Rs 8 lakhs pa.
Term Life Policy
Money Back Policy
The premiums for the money back policy are unaffordable for this person. The most that he can afford is about 30,000 which in the money back policy can buy him only about 5 lakhs of cover, which is clearly not enough for the family
If the person were to buy term life policy, and put the difference of premium in a simple instrument like fixed deposits, he will be better off monetarily if he survives the period.
On both counts – adequate cover and savings in the event of survival, term life stands out as significantly superior.
Mixing investment with insurance, defeats the purpose of insurance – a sum assured to take care of the expenses that the survivors will need.
Insure with term life policy and invest the difference in premium with instruments like mutual funds, PPF, NSC, etc. You will be better off and your insurance needs will be met.