process
Separate Insurance From Investment
The rule
Cover for your family and growing your money are two different jobs. A product that promises both, like an endowment plan, usually does neither one well.
Where it flips
Taken too strictly, 'never mix' can make someone skip cover fully while they 'sort out investing first'. That leaves the family unprotected. So buy the term plan today and start the separate investing alongside it, not one after the other.
Some policies say they cover your life and grow your money together. But most of your premium gets eaten by charges. The rest earns a poor return. The clean way is to keep the two jobs apart. Buy a plain term plan that pays your family a big sum if you die. Then separately invest the extra money into a mutual fund. Kept apart, you can see what each rupee is doing. Bundled together, the cost stays hidden. ULIPs and endowment plans are the classic bundles to avoid.
A worked example
Aarvi is offered an endowment plan at ₹50,000 a year, giving ₹5 lakh cover. Instead, a term plan gives her ₹1 crore cover for about ₹12,000. The remaining ₹38,000 goes into an index fund each year. [illustrative]
How to spot it
- ·'insurance that also gives you returns'
- ·premium far bigger than a term plan for the same cover
- ·agent talks up the maturity money, not the death payout
Monika Halan · Let's Talk Money