Why a Term Policy scores

I will talk about Term plane with out money back in this article

1. It is cheap
Let;'s compare a term Policy with and Endownment Policy in teerms of how much you will pay as premium. If you are say, 30 years of age, you would pay a premium of about Rs.1,800 to 4,740 every year ofr a 30 years Term Life cover of Rs 5 lakh.
In contrast, if you took a 30-years Endowment policy cover for Rs 2 lakh, you would end up paying a premium of around Rs.6,500 ot Rs.20,000 a year.
So, a Term Policy offers you double the cover for about one-fourth the premium.

2. You can circumvent the additional returns you would get from othere policies.
Going with the above example, if you do survive three decade, Nothing comes back in Term plane. But under the Endowment cover, you would get the assured sum (which is also known as your cover -- the amount you are insured for), plus a bonus (additional amount).So you could end up with around Rs 5 lakh (Rs 2 lakh + Rs 3 lakh as bonus) in total.

If you think that this is a good deal, hang on.
~ You pay the comany Rs 1,800 every year for the Term Policy.
~ For the Endowment Policy, where you get a hefty Rs 5 lakh back, you pay the company Rs 6,500 every year.
Now think about this alternative:
i. Pay the company Rs 1,800 every year.
ii. Take a Term Policy.
iii. Invest the balance of Rs 4,700 (Rs 6,500 - Rs 1,800), that you save as premium, wherever you want.
Consider stocks or equity mutual funds as an investment option over a long term. Your risks would be equally low, but your returns would be higher.
But remember: the key word is 'long term'.

3. You can get better liquidity if you put only a portion in Term Insurance.
Liquidity is a term used to denote how fast you can sell your investment and get money (liquid cash). So if you invest the notional 'difference' in premiums (Rs 4,700) between a Term and any other kind of plan in some investment (say, in a mutual fund), you can cash out all of it in an emergency in around 48 hours. In contrast, in an insurance policy, you have to pledge the policy and seek a loan against it.

Then pay an interest of about 8% to 10% on that loan.

4. You may end up getting underinsured.
If the premium is high, you might be tempted to go for a smaller sum as cover. Say you are 30 years old and looking for a life cover of Rs 20 lakh. You would spend about Rs 7,200 in a Term Policy.
In contrast, an Endowment Policy would set you back by about Rs 26,000.
Now, because you cannot afford Rs 26,000, you might be tempted to go for an Endowment Policy of only Rs 10 lakh that would cost Rs 13,000 a year.
Do you know what you have done? In one stroke, you have halved your life's financial worth!
If something were to happen to you, your family would get much less than they deserve.
Whatever policy you choose, don't meddle with the sum that you think your family deserves when you are gone.

The last word
Most life insurance companies in India offer at least one term plan each. Consult your insurance advisor for details. But don't expect him/ her to be enthusiastic about Term plans since insurance advisors get the least incentives for selling term plans. Insist on information till you get it.