Myth or Fact: Term insurance without returns is a waste of money

Simple! Term insurance is the most affordable way of ensuring your family will be financially protected in the future if you pass away unexpectedly.

Let’s understand with an example:

Let’s say you are married with a small child. You may have home loans to repay, elderly parents to take care of, child’s education to pay for, and household expenses to meet. On top of that, you are the sole breadwinner of your family. 

If you pass away unexpectedly, who will take care of their financial needs? You wouldn’t want them to struggle, would you?

If you have term insurance and you pass away during the policy duration, your family will get a significantly large lump sum insurance money from it which will help them overcome any financial crisis they may face in your absence. 

Even if you get no returns, you get peace of mind knowing your loved ones will be taken care of even if you’re not around. Isn’t that reason enough to buy term insurance?

If you need a bit more convincing, find out in detail why you should buy term insurance.

Yes. A Term Life Plan with Return of Premium (TROP) is one such term insurance plan that refunds only all the premiums you have paid during the policy duration if you outlive your term policy. 

Well, if you feel that you should get back something since you have paid for it, then yes, you can buy a TROP plan.

But remember, you will not be getting any investment returns but only all the premiums you have paid. And thanks to inflation, its value will go down. So technically, you are not getting the entire amount back. 

Plus, TROP plans are more expensive than normal term plans. If you want better returns, you’re better off investing that additional money you’d pay towards premiums in mutual funds or fixed deposits. 

Know more about TROP plans and find out if you should buy one.

No, you should not because a term insurance policy will not provide you with any returns or maturity benefits. It will only provide a payout to your nominees only if you pass away during the policy period. You and your family won’t get anything if you outlive the policy duration. 

To get returns, you can consider getting a conventional life insurance policy that provides both financial protection in the form of life cover as well as investment returns. You will receive the maturity amount if you outlive the policy period. And in case you pass away, your family will receive the life cover and the maturity amount but the life cover amount will be typically lesser than that for term insurance. Most of your premiums will be invested and paid with returns as maturity benefits. 

P.S.: You can get both term insurance and life insurance too. Find out in detail about the differences between life insurance and term insurance.

You can. Technically, if you stop paying premiums for your existing term policy, the policy will be discontinued and you’ll end up losing all its benefits. However, you will also lose all the premiums you have paid till date.

There is another type of term plan called Zero cost term insurance that returns your premiums at a certain point in time. In this policy, you can exit the plan and get a refund of all the premiums paid, minus GST, at a certain point in your policy duration. You can opt for this if there comes a specific time in your policy term when you feel all your financial responsibilities have been taken care of. 

However, the insurer decides when you can discontinue and exit the plan on the basis of several factors like your age, policy term, plan features etc. So the permitted time or condition of exit may or may not be suitable to your life plan. 

Also, you will have to wait for a really long period, say 25-40 years* or even more to be able to do it. 

*Depending on your insurer

Simple. The total life cover from other policies such as employer insurance, credit card insurance, government insurance, mutual fund insurance, etc. will not be enough to meet your family’s financial needs in your absence and will only be protecting them partially. 

The life cover your family will receive from a term plan will be significantly higher than that and it will be customised to you and your family’s needs. It will help them be financially secure if something happens to you, especially if you are the sole breadwinner.

Find out in detail why you should have a term insurance policy even if you have other policies.

It is a myth that term insurance is expensive. 

Term plans are extremely affordable, especially when bought early in life. 

For example, you can get a term plan with a ₹ 1 crore* life cover for as low as around Rs 500/month*

(*numbers are indicative)

With a term plan, you can get a significantly large life cover at relatively affordable rates that can keep your loved ones financially secure.

Bonus: You will have peace of mind knowing your family will be financially protected even if you are no longer there.

See, even if you don’t plan to get married and have kids, you may have other loved ones like your elderly parents, or siblings who depend on your income. When you pass away, a term policy’s payout can be used by your dependents to meet their expenses such as loan repayment, child’s education, household and healthcare expenses etc. 

See, investing your money is always a good idea. But what is equally important is creating a financial safety net for your family that protects them when you are no longer there. A term policy can help you create such a net. 

Still confused? Find out in detail who should buy term insurance.

No, you are not too young to buy a term policy. You can buy a term plan as soon as you start earning (provided you are 18 and above). The more you delay, the more expensive your premiums can become. 

By buying a plan early, you can lock in cheaper premiums which means your premiums will remain unchanged throughout your policy duration unless there’s any change in your life cover or other policy benefits. 

Find out in detail about the right time to buy term insurance.

Investing can surely help grow your wealth over time but it won’t happen immediately. It may be quite some time before they start giving significant returns. 

But remember, you need to be alive to be able to keep investing. What happens if you pass away unexpectedly before you can build a sufficient nest egg for your family? What if you are the sole breadwinner?

Your family won’t be financially secure in your absence and will struggle to meet their expenses.

Term insurance is that financial safety net that will protect their financial future in the event of your untimely death. The life cover from your plan will be significantly large and will ensure they are taken care of even in your absence. 

Don’t confuse buying term insurance with investing. They have very different purposes. Have goal-oriented investments but buy a term plan for financial protection, as a backup plan.