Which is the Best Life Insurance Policy in India? I often face this question. Especially, when someone looking for investment, planning for their kids’ future or saving tax. So which plan it is?
In this post, I am repeating the basic GYAAN of insurance in a different way. Before searching for an answer of “Best Life Insurance Policy in India” first, understand why you need insurance. Insurance is a risk-mitigating tool. It means you are transferring your risk to the insurance company. For this, insurance company charging you the premium. So if you feel there is a risk of life (death), then buy life insurance. If there is a risk of death, then you buy health insurance. Same way, if you find the risk of accident, then buy an accidental insurance.
This is the major reason of buying insurance. However, in reality, the insurance meaning is entirely different especially for us. We feel insurance as an investment product. So we are searching for “Best Life Insurance Policy in India”. The insurance concept, especially when it comes to LIFE INSURANCE is purely backstabbed. By all of US means insurance companies, agents, and buyers. No one bothers about how much life cover I am having. Same way insurance companies, banks, or agents not bother.
Let us understand the types of insurance policies offered in India. The situation may be same in other countries. But concentrate our topic of discussion to India alone.1) Whole Life Insurance Policies-As the name indicates the life cover will be up to the policy holder’s death. The main purpose of this product
1) Whole Life Insurance Policies-As the name indicates the life cover will be up to the policyholder’s death. The main purpose of this product creates an estate to his dependents. However, in reality, life insurance companies provide the flexibility of maturity payout. For example, in case of LIC’s old whole life insurance policy, either the maturity will be at 80 years of age or 40-year policy term completion (whichever is later).
As the policy period is long, the premium will be very less. However, in reality, agent’s never sell such products. Why? The premium will be less. So the earning probability will also be less. Bonus rates may be higher than any other products (I think currently LIC offers Rs.70 per year per Rs.1, 000 SA as a bonus). However, the result will be returns of 7% to 8%. However, do you feel 8% is the BEST return for an investment of 40 years? If you found this as Best Life Insurance Policy in India, then go ahead.
For example, check my post on whole life insurance at “LIC’s Whole Life Plan-Best for Estate creation“.
2) Endowment Plans-These plans cover your life risk up to the maturity period. You simply pay the premium up to the policy period. At maturity, you receive the Sum Assured+Bonus. In case the death of the life assured, the nominee will receive, the Sum Assured+Bonus accrued until that day. There may be different variants to it like normal endowment plans or limited period endowment plans. However, the basic features are same.
Why you can consider this as ‘Best Life Insurance Policy in India”? If you feel 5% to 6% is best return and the life risk of 5 times to 10 times of yearly income is best to sustain your dependence in case of your absence.
Check the examples of such plans at “LIC’s New Endowment Plus (Table No.835)-Features, Benefits and Review” , “LIC’s Jeevan Labh (Table No.836)-Features and Review” and “LIC’s new plan Limited Payment Endowment Plan (Table No. 830)-Review“.
3) Money Back Plans-These are again nothing but typical endowment plans. But you receive some % of the sum assured during the policy period. Buyers feel this as an advantage. However, check the reality. Insurance companies charge higher premiums for such plans.
Why you can consider this plan as “Best Life Insurance Policy in India”? If you feel money required for you at regular interval of policy period, 5% to 6% is best return and as usual with lesser life risk, then definitely go ahead.
Check the examples of such plans at “LIC’s new plan 2015-New Children’s Money Back Plan (No.832) Review“.
4) Special plans-For example, during tax saving season, LIC launches special plan. This year they launched Jeevan Shikhar. These are for a limited period with some new features. But they are truly meant to garner business. Other variants are like LIC’s Jeevan Saral. Designed beautifully. LIC received huge recognization. However, check the experience of buyers after 10 years or so. The returns are just around 5%.
If you feel that such products are really “Best Life Insurance Policy in India”, then go ahead.
Check the examples of such plans at “LIC’s New Plan 2016-Jeevan Shikhar (Table No.837)-Feature and Review“, “LIC’s New Plan 2016-Jeevan Pragati (Table No.838) Review” and “LIC’s Jeevan Saral-Why so much confusion?“.
5) ULIPs-These are market-related products. Historically sold by private insurance companies and later on LIC too entered into it. But nowadays no agent ready to sell. The reason is expense ratios of such plans reduced. So agents also started to earn less.
In reality, these products are still costly when you compare with mutual funds. The other two negatives are hard to track the historical data and liquidity. Also, such products never fulfil your actual insurance requirement. Because if go for the actual insurance need, then you can’t afford the premium.
If you don’t have any issues, then these may be your “Best Life Insurance Policy in India”.
6) Term Insurance Plans-These are pure life insurance products. Means insurance companies only ask you the premium based on the risk they are offering you. In such plans, there will not be any investment amount. The premium will be purely for the life risk insurance companies providing you. If one opts for say Rs.1 Cr term insurance for 30-year term and the insured die within this 30-year period, then his nominee receive Rs.1 Cr. If his death does not occur within this 30-year period, then nothing will be payable back to insured. No investment part in such products. Therefore, you will not receive anything in return at maturity.
When we are looking for insurance plans, these are the one, which offers pure LIFE INSURANCE. Refer below link to know more about the features and top 5 term insurance products in India.
Here my intention was not to introduce the features of all types of life insurance products. Many of you all know the basics of life insurance. However, make sure that your search of “Best Life Insurance Policy in India” must end with the product called TERM INSURANCE. Because Term Insurance is the must have and best product which you buy for life. It is a MUST for all. But sadly regulators, insurance companies, and agents never sold this wonderful product. Also, we buyers never felt that we are looking for LIFE INSURANCE but not a product which combines INSURANCE+INVESTMENT. We simply followed agents, insurance companies or the advice of our friends. However, forgot the real need of life insurance and how under insurance badly affects our financial dependence life.
Now think twice before buying a life insurance. In my view, the “Best Life Insurance Policy in India” is only term insurance.
Refer below my posts and a video of how to calculate returns on your life insurance investment before believing on me.