Is Term Insurance an Investment or Expense

Is Term Insurance an Investment or an Expense?

A husband-wife's conversation simplifies the concept of term insurance

Delhi based Adi (33) and his wife Tara (31) are discussing their financial plans. Adi is convinced about buying a term plan while Tara is not sure how it will help. She sees it as an unnecessary expense, especially because there is no maturity benefit. Let us see how the discussion pans out:

Adi: Tara, I have learnt that a term plan is the most comprehensive form of financial protection. It offers a large cover for a small premium. I think it makes a lot of sense for us to get term insurance.

Tara: Really? What does that mean? Say you invest Rs. 10,000 a year, how much money will we get back? And in how many years?

Adi: Oh no. Understand that a term plan is a pure protection plan. This means that I pay a premium for a fixed no. of years, say from now till my retirement, and get a life cover for that tenure. If something happens to me, you will get the cover amount. Otherwise, once the term ends, we won’t get anything.

Tara: What? Do you mean that we pay for 30 years… umm means about 3 lakhs, and not get anything back? How does that make any sense? Why not put the money in a fixed deposit or a recurring deposit? At 8-9% return, we can get back some money after 30 years!

Adi: I understand how this seems to you. But you must think long-term. Imagine that even if we got back all the premium paid, the 3 lakhs, after 30 years, what good will it be? What will we be able to buy with just 3 lakhs? At that time, it won’t even last us 3 to 4 months!

On the other hand, a term plan will pay you the promised money in case of my demise, anytime during the entire policy term. This means that even if I die after paying a single premium of Rs. 10,000, the entire sum assured of 1 Crore is paid to you. Now does that sound too bad?

Tara: Oh! Okay. But what are the chances of something like that happening? Are you not being too pessimistic?

Adi: Well of course I am hale and hearty today. But life is uncertain. What is something happens to me? I don’t want to leave anything to chance. With a term plan, I will get peace of mind. I will be assured that even if I am not here, you will have enough money to take care of yourself. Besides a term plan is not very expensive and once we avail the plan, the premium does not change for the entire term.

Besides, don’t consider it as an expense. The peace of mind, convenience and financial security it provides us is worth much more than a few thousand rupees a year. A suitable cover will help you meet all types of outflows - from household expenses and rentals to EMIs and school fees for our kids.

Tara: Okay! I understand this now. I always knew you were smart.

Finally, Tara understood that insurance is not an expense but a safety net. It cannot be compared to an investment, it needs a different yardstick.

Learn more out the Max Life Online Term Plan and create a quick quote to map your needs to your protection plan.

DISCLAIMER: MAX LIFE ONLINE TERM PLAN (UIN - 104N078V01 )is a Non-Participating, Non-Linked, Pure Term Insurance Plan. Life Insurance coverage is available in this product. This plan is a pure term insurance plan that provides only death benefit and no maturity or surrender benefit. Insurance is a subject matter of the solicitation.

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Max Life Online Term Plan Plus

An affordable term insurance plan with three death benefit options