Do you know that there are so many different kinds of Life Insurance? You have your Unit linked insurance plan (ULIP) which gives you insurance along with an investment opportunity. There are these very famous endowment plans that promise insurance along with savings. And many more like Money back, Child’s Plan, Retirement Plans, etc. Term insurance, also known as “pure risk cover” is one such variant of Life insurance policy where the dependents get a sum assured by the insurer, redeemable on the death of the policyholder during the tenure of the policy. It is quite simple and extremely valuable. However, people tend to perceive it as a costly expense compared to other insurance plans, as there are no returns. Here are 5 reasons why people opt out of term insurance and shouldn’t do so:
#1: I don’t get my money back/ Give my money back!
Insurance is bought for all the wrong reasons like greed, taxes, fear, etc but the only real reason to buy insurance is security. Put an endowment plan under the microscope and see it serves the purpose for which you pay the premium. Can you justify it? No, because it is a product that dances around security instead of actually providing it. Term insurance is very simple in terms of providing absolute security. You pay a price to ensure your dependents of any troubles after you die. It is not a tool of investment, but a guarantee to receive a fixed amount if something happened to you. If you are hungry for returns the most ideal option is an investment in Mutual Funds. But term insurance will return a fixed lump sum in the event of your death.
# 2: It’s very expensive!
When you check on the amount a person normally pays for an insurance policy compared against the average term insurance premium will show you the truth. Term insurance is lower in terms of premium as compared to endowment plans and Unit-linked plans. To many people, it seems like a costly affair, but what you must remember is the pot of gold in the end instead of looking solely at the current costs to bear.
# 3: Other schemes have better benefits!
The term insurance simply acts as a financial safeguard for the family, it is affordable, receives tax deduction under Section 80C and the best of all is the value over cost. The premium you pay to maintain the policy adds up to peanuts compared to the real value of the policy. A popular diversion which leads to losing the essential aim of insurance is the fancy add-ons that other schemes provide. Don’t mix your investment with your insurance!
# 4: I have more important things!
People often opt out of paying their term insurance because they find it plausible to spend it on things like education, marriage, medical bills, etc. But you just have to ask yourself what happens when you die? Who will take care of it all? It doesn’t mean you shouldn’t save up for such things, but in order to avoid unloading these burdens on your loved ones, it is recommended to take term insurance.
# 5: It’s a luxury, not a need!
There is a false impression going around that term insurance is a luxury and it is not a necessity for everyone. You spend time and money every single day to increase their security in terms of health, financials, etc. So it seems fitting to protect the ones you love from any troubles when you’re not around. It is for everyone who wants to keep their dependents safe.
#EXTRA: I haven’t heard of it!
Why do you never hear of advertisements selling term insurance? Think of it this way. You are offered two different cakes. One is a colorful confetti cake with sprinkles and buttercream which is a real treat to your eyes; on the other end, you have a simple chocolate cake with a humble glaze. The confetti cakes seem to have a lot to offer but when you bite into it you find it is just a simple sponge with a whole mess of toppings and nothing special. While the chocolate cake is rich in quality.
However, term insurance is like the chocolate cake, it is pure to its purpose and nothing more. There are no fancy toppings to it like other schemes. While your endowment plans are like the confetti cake. The fancy things will have you pay more for nothing, while the term insurance delivers as promised.
Ignorance is never bliss in our world. It is always good to understand what you want before you lock into any insurance scheme, verify the big picture of every option you have. Use an app like MyWay Wealth which helps you set up term insurance.
Be sure before you insure!