Saturday, 19 November 2011

Why Term life Insurance policy is not attractive

The aim of any insurance plan is to protect the financial loss or expenditure due to any unfavorable circumstances. In case of life insurance policy also protect the financial loss due to the death or disability of the insured.   A life insurance policy gives a specified amount (sum assured) to the insured in case disability and to the nominee in case of death of the insured. Most of the life insurance plans gives a specified amount (maturity value) at the end of the insurance period. But term insurance policies do not give any amount to the insured, if he or she is alive at the end of the specified term or maturity. So the insurance premium for term life insurance is comparatively very low than other life insurance policies.

The following table shows you the difference of a term life insurance policy and an endowment (a traditional type of life insurance) life insurance policy. Only Approximate figures for explain the difference.

Type of policy                       Term life policy       Endowment

Age (Joining)                                       30 yrs                  30 yrs

Annual Premium(Approx.)              10000                   10000

Insurance Period                               35 yrs                    35yrs

Sum Assured                                 30,00,000              3,00,000

Maturity Value                                    Nil                      3,00,000 +

As pet the above table, in term life insurance, if the death of the insured happened any time before the maturity period (35 years) the nominee will get Rs. 30 Lakh. But in endowment life insurance the nominee will get only Rs. 3 Lakh. But if the insured is alive till maturity the term life insurance gives nothing, but the endowment policy gives Rs. 3Lakh plus bonus or loyalty addition as per the policy terms & conditions.

No maturity Value. The main disadvantage of the term life insurance policy is that it has no any maturity value. But when compare with the sum assured, we can see that the criticism has no value. To protect your family from insecurity you are paying this premium and can consider it as an expense for the financial stability of your family.

People wish to get back the money they are paying as premium. They do not think about the security which the term insurance policy provides. They value money more than security.

Normally nobody likes to die or even think about their death. Everybody think that they will live long. So they are not ready to spend this unnecessary expense.

But if you go for life insurance you must know the value of financial security, a life insurance policy assured than the money it gives back to the insured after few years. Any good saving scheme is suitable for this purpose and most of the time you can get back more from such saving schemes than life insurance policies.

If you want a sum assured of Rs. 3Lakh only, take a term life insurance for Rs. 3 Lakh sum assured and pay an annual premium around Rs. 1000 and invest the remaining Rs. 9000 in any investment scheme or even bank deposit, you will get back more than an endowment policy assured.

All figures in this articles are not actual, only approximate figures near about actual amount.

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