Life insurance is more important for you even if we are married and have children or you just have dependents. Your life is valuable because you are the person who is earning and providing for your family. When things go wrong you create an income gap which could put your dependents in financial trouble. We may not help them emotionally but in terms of monetary aspects you should ensure your family maintains the same life style even though you are not with them. Many times we are misled by insurance agents, bankers or advisors. We are often confused and end up buying non-productive insurance policies.
Insurance and Investments should not be mixed in any way. ULIP is such product which has both insurance and investment in it. But is that the best way to invest? Definitely a BIG NO!
Unlike traditional endowment and money back plans, Unit Linked Insurance Plans are market-linked products and have the potential to deliver higher returns compared to endowment plans.
For example Sameer aged 30 yrs buys a ULIP for a premium of INR 50000 P.A. for 20 years. He gets an insurance coverage of 5 lakhs which is 10 times of his premium amount. There would be charges for fund management, mortality, Administration charges which would be deducted and would impact net returns which he would receive in-hand and the rest of the amount will be invested in a fund which would be invested in the financial markets based on the fund objective (50:50 or 80:20 in Equity/Debt).
If Sameer opts for term insurance the premium would be below INR 10000 P.A. for 50 lakhs of coverage but he would not receive any maturity proceeds. The rest of the premium amount can be invested in Mutual Funds or other investment avenues which suits his other Financial Goals. Term insurance provides pure risk coverage and it is an economical way to get life insured. There are insurance companies which provide Insurance coverage till the age of 80.
Death of a loved one is hard enough; we should try not to make it harder by putting our loved ones in financial trouble if the unfortunate event does occur. We should plan to buy an adequate term insurance as early as possible. It is always advisable to consult a Financial Advisor before opting for insurance.
