Term Insurance Vs Endowment Plan
We often come
across these two terminologies when we talk about insurance and investment. As
my earlier articles and blogs here I would like to mention here again that never
mix your insurance need and investment need. These both shod taken separate
after analyze the need. If you have no time to analyze or do not have knowledge
then in that case you should contact qualified financial planner.
In term insurance
and endowment insurance which one is good? Before going to get answer let us
first understand these product properly.
Term Insurance:
It is pure
insurance and the premium for insurance cover is very low. It means you will
get higher insurance cover by paying less premium. A 30 year old healthy person
will pay Rs 8,000 for Rs 50 lakh insurance cover. In case of any unfortunate
event during policy term, insured’s family will get full sum insured. If
nothing happen then insured will not get anything at the end of the term.
Endowment Policy:
In
endowment policy, in case of any unfortunate event happen during the policy
term, the insured’s family will get sum assured and if insured survive the
whole policy term then at the end of the policy term insured will get sum
assured along with declared bonus. Keep in mind bonus is not guaranteed. A 30
year old person will pay around Rs 50,000 premium for Rs 50 lakh cover.
Which one you should choose?
Many of us
think that if there should be some payout at the end of the term if insured
person survive the term. If you get trap with this thought then you will pay
high premium for the same insurance cover and will get lower return around 5%.
In my
point of view, you should choose term cover. You will get high coverage with
lowest premium compare with other insurance. You can invest rest of the premium
after paying term cover premium amount in the other available investment option.
Even PPF
and bank fix deposit will give you higher return than endowment policy. It is
worst option available for investor with low return. Only agent will get
benefit of the hefty commission from the endowment policy and at the end of the
term investor loose the better opportunity and get poor return.
In
general, you pay the insurance premium around 20 year and get the return 5%-6%
after 20 year paying premium. If you invest the same amount for same period in
good equity mutual fund then you may get the return of around 14%. Now it is on
you which one you will prefer.
If you want more information
regarding investment or you have any other query about investment feel free to
ask us.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
