Term insurance is best life insurance

Term insurance policies are designed for financial protection of family members in absence of breadwinner because of untimely death. It is the pure and best form of life insurance because only purpose of term insurance is to ensure family’s financial protection, no-more-no-less. With the death of the breadwinner of the family, income also dies and proceeds from term insurance can be used to meet the financial requirement of the family.

Why this is called term insurance? Because they are offered for a specific term or period. In India most term insurance policies are offered for maximum term of 25-30 years.

In term insurance, premiums are far less than other insurance forms like endowment policies. Thus for minimal premium, term insurance can offer large sum assured. Inspite of that popularity of term insurance is india is dismal because of varied reasons.

In term insurance, in case the policyholder outlives the term of the policy, he gets nothing. At first this fact is a bit hard to digest and is used unscrupulously by insurance agents to sell other form of insurance products like endowment policies, ULIP etc. But it becomes easier to comprehend if you think other way – do you get premium back in case of car or 2 wheeler insurance? Then why expect the same in case of life insurance; though your life is more valuable than your car. At the end, insurance is a way of risk mitigation for which insurer charges premium from the policyholder.  Thus whether premium is got back shouldn’t be a consideration while going for life insurance.

Second, low awareness of term insurance policies as Life Insurance Companies or insurance agents doesn’t market term insurance policies because of vested interest. As investments cum insurance plans are more profitable than pure risk products, all high sales pitches of life insurance companies are directed toward investments cum insurance plans. Insurance agents also avoid term insurances as they fetch less commission.

Key points to remember:

• Life insurance is meant for “death benefits”, don’t buy it for “living benefits”.
• Term insurance is good for policy holders, while investments cum insurance plans are good for insurance companies and agents.

Term insurance is the best life insurance. Period.

Please send me your comments.