Is Term Life Insurance Plan an Investment or Expense?
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Is Term Life Insurance Plan an Investment or Expense?

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  • 12th Mar 2021
  • 681

Is Term Life Insurance Plan an Investment or Expense?

When it comes to investing your money, the first question you ask is ‘What is the return?’. And while some investments might offer generous returns, others might not give significant monetary returns but offer many other unparallel benefits, necessitating their purchase. One such investment is a term insurance plan. Some might think of a term plan as an expense since it is pure insurance cover with no investment returns. However, when you look at the other side of the coin, it is a comprehensive insurance shield that exclusively protects your precious life.

What is term insurance?

term insurance plan offers life cover for a specific tenure, in return for premiums paid for the policy. In case, the policyholder dies within this policy period, the nominee or the family of the policyholder receives the death benefit.

Term policies only offer protection against uncertainties and do not provide any return on investment or a cash-value benefit since they are pure protection plans. For example, if you take a term plan for 15 years at the age of 20 with a sum assured of ₹ 30 lakhs. You would be paying regular premiums for 15 years, and if unfortunately, you die at the age of 35 or before, your family will get financial security in the form of ₹ 30 lakhs. This will help them manage their expenses and maintain their standard of living in your absence.

But if you outlive the term of the insurance, there is no cash-value offered. This raises several questions, such as:

  • What is the use of such a plan when there is no return?
  • Is it better to safeguard the money in a fixed deposit (FD) than get a term plan?
  • What if I outlive the plan; then the money is lost?

However, all questions are answered by term plan benefits.

What are the benefits of a term plan?

Term plans offer:

  • Reliable security for the family during tough times: You cannot use monetary parameters to calculate the worth of all investments. Some investments, by nature, are for you and your loved ones security. When you pay premiums of your term plan, you are buying financial assurance for your family that will be safe if there was an unfortunate event in the future, causing your absence. Your term plan is your peace of mind.
  • High sum assured at low premiums, offsets the gap between cost and potential returns: Term plans are the most economical insurance policies. You pay minimal premiums (at your convenience) and get a high sum assured for your family. Hence, this policy does not cause you a monetary loss. Instead, you get tax benefits for term plan premiums and death benefits. Also, you can always renew your plan to ensure lifelong coverage.
  • Potentially higher benefits to beat FD advantages: FDs keep your money safe and give you a minimal return in exchange. However, there is no life cover. But a term plan has minimal premiums and allows a large sum assured coverage, securing your family more wisely than an FD.
  • Financial independence for your loved ones in your absence: Term plans do not list any rules money.regarding usage of death benefits. Families are independent to choose how they wish to use the

The future is unpredictable. You might not want to think of death, accident, disability, a major illness, etc., but you must plan for the security of your family in your absence. Trust Kotak Life Term Insurance Plans to stand with your loved ones during tough times. These plans offer long term financial security at affordable and flexible premiums to safeguard your loved ones future.

- A Consumer Education Initiative series by Kotak Life

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