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Rs 44,000. One could argue that in the endowment policy, we would be getting back an amount when the policy matures. That's true, but only if you survive! And insurance is actually taken to ensure complete protection for your family. So, if you had taken a term insurance and died after two years, you would have paid Rs 6,000 and your family would have received Rs 10 lakh. If you had taken an endowment you would have paid Rs 88,000 and your family would have received more or less the same amount of Rs 10 lakh. That's how effective a term insurance is! (For the purpose of this example, a healthy male of age 35 was considered).
You don't need to take one term insurance plan for a very high cov­erage amount. Depending on your stages in life, keep adding term insur­ance to your portfolio. You could be opting for the first term insurance as soon as you get your first job. Then increase the amount by buy-

ing another term insurance when you get married and then maybe further increase it when you have children. If you plan it well, there can be nothing more satisfying than knowing that your family is adequately insured at any point of time. In fact, if you have a good term coverage amount, you can actually invest in riskier products over a longer period of time, knowing fully well that your family is completely secure even if your riskier investments go wrong. But yes, the earlier you take a term insutance, the cheaper it will be - that holds true for any insur­ance though.
When I was a child, I had heard a very interesting comment. God was asked - "What is the most perplexing rhing you find about life?" and He it seems had replied ''Any instant there is at least one person dying in this world but if you ask anybody around you whether he / she is likely to be the next· one, everyone, irrespective of their physical condition or age will reply - No, not me". We human beings are eternal optimists, which is extremely good for the progress of mankind; but do we actually know what will happen ro us romorrow? So isn't it better to err by being over-insured instead of being under-insured? Perhaps life is like the cliched statement on cricket "a game of glorious uncertainties". I feel it doesn't pay ro challenge fate - it perhaps is a bit like Murphy's Law - "if anything can go wrong, it will".
To sum it up, if you are thinking of buying your first insurance product, make sure it is a term insurance. Once you have taken more than adequate amount of term insurance, use the bal­ance part of your savings for investing in the more "attractive products". And for those who have a lot of investment products, but not term insurance, I would suggest you get one now. When thinking of just insurance, think term insurance; when thinking of invest­ments - evaluate all of the rest! ~

It is always better to go for term insurance when taking life insurance cover as it

Let me start with a simple description of 'Term Insurance' - in rhe unfortunate event of
death of the policyholder, the nominee gets a pre-decided amount, called the "sum assured". There is no money paid back to the policyholder in case he survives the term of the policy. This type of policy covers only risk and is not an investment tool. In fact, we can also go to the extent of calling it the only "pure insurance" product avail­able. Hence term insurance is also the cheapest form of insurance product. You can pay a small premium and get a vey large insurance cover. The rest of the products are a mix of insur­ance and investments with increasing levels of complexity and charges to add to them. Of course trust the finan­cial wizards to bring some complexity into term insurance also - increasing term insurance, decreasing term insur­ance and a host of riders which all come with a cost arrached to them! There are merits in these variations also, provided one knows which suits them best.
Most people spend a lot time, effort and money in different forms ofinvest­ments - UUPs, mutual funds, equities and fixed deposits, to name a few. All these products use your money and try to make more money our of it. In some cases, the returns are fixed and in some they are linked to the market. So if the market goes up, you make money and if the market goes down, you lose
money. And wherever the returns are fixed, the rate of interest is usually very low. Well, I am not suggesting that one should not invest in these, bur it should ALWAYS be after one has taken adequate term insurance cover. In fact, a healthy portfolio is always a mix of sound insurance and investment prod­ucts. Just as one invests in debt and equity to "hedge risks" in investments, one should insure and invest for "com­plete peace of mind" when it comes to planning for your family. And when I say adequate cover, I would be suggest­ing between 7 to 10 times your current annual income, maybe even more, given the inflation levels we have seen in the current times. The investment tools should be used to multiply your money and not to provide the basic cover which ensures peace of mind for you and your family.
If it is so obvious, why don't people take adequate term insurance cover?
Well, for starters, money paid by you in the form of premiums is not returned back to you. This seems to be the only factor which people seem to be using to evaluate term insurance and hence go on to opt for the more arrractively packaged "high returns" products. This is the wrong way of looking at your safety net because we are talking abour insurance and not investments. When you think insur­ance, your only aim should be to pro­vide as big an amount to your family and children, in case you not around. In case you survive till retirement you would anyway end up saving a sub­stantial amount through investment tools or by just purring money into the bank.
All the confusion and counter-argu­ments start when you mix insurance and investments. Hence, I suggest that we delink insurance and investment for the moment. If your objective is to provide a lump sum amount for your family in case you are not around, you should be looking at the highest possible amount by paying the least possible premium. Well that is exactly what a term insurance provides - lots of cover at very low premiums. Let me explain this in detail by citing an example - by paying an annual premium of Rs 3,000 one can get an insurance cover of Rs 10 lakh if you opt for term insurance. Bur if y u go for a endowment policy you would need to pay an annual premium of
L

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