I am looking for an Insurance plan which would cover - death, terminal Illness, accidental Death, critical illness - and also get money back at the end of maturity like endowment plans. Could you please suggest any plan (but not term plan) which would cover me as well as give returns on maturity.
- Aditya
It is always better to Keep your investment and insurance needs separate. When you mix them, you end up with a a very low life insurance cover and an inferior investment product. Endowment plans (or Insurance plans with investment element in them) are costly, they also have various charges and they don't offer very good returns. In fact, the returns from endowment policies don't even beat inflation.
For example, a 25-year-old male will have to pay an annual premium of ₹1.15 lakhs for a ₹25 lakh life insurance cover for 21 years in an endowment plan. The same person can buy a life insurance cover of ₹1 crore by paying an annual premium of ₹15,000 in a term plan. If the person invest ₹1 lakh (₹1.15 lakh minus ₹15,000) per year in a bank deposit, he will accumulate ₹50.42 lakh at the end of 21 years. An endowment plan, on the other, would have offered around 5-6 per cent returns and he would get around ₹31.5 lakh (at 6 per cent) at the end of 21 years. As you can see, the preference for getting something at the end of the term on maturity has actually resulted in a very low life insurance cover and poor returns.
That is why we always recommend pure term insurance plan to buy an adequate life insurance cover. For extra covers, you can add riders to your basic plan. We believe that investing in an equity mutual fund scheme is the best way to achieve long-term financial goals that are five years above. If you are a new comer to the stock market, choose a top-rated balanced scheme and start investing every month via a Systematic Investment Plan (SIP). If you are familiar with the stock market, you can invest in a diversified equity scheme. You must continue with your SIP investments irrespective of the market conditions. This will help you to average your purchase cost and enhance your returns.
This article was originally published on March 01, 2016.
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