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The heading of this article sums up everything I wish to say in this article, rest that follows is why and how of this statement.

Before I go further, I want to clarify that when it comes to life insurance, you will be presented with lot of different options, some with benefits, others with investment option, but one without any frills, pure and simple life insurance cover, it’s called Term Insurance.

Waste NO time in going over details of all different options, those are neither efficient insurance plans nor investment products, understand the GOLDEN RULE Investment and Insurance are two different products, with completely different value propositions; and any attempt to mix and merge these is only a marketing ploy to confuse customers. The only insurance that anyone needs to buy is Term Insurance, one that pays the nominee insured amount, in case of death and has no survival benefit, its cheapest and best.

I can end this discussion here because previous para completely covers what one needs to know about insurance and particularly Term Insurance; but there is an important aspect that needs to be dealt with and that’s the common thinking most of us have when it comes to buying insurance, and it’s about return. Most of us are quick to calculate the return on the amount of premium paid over the period of insurance and that’s where the marketing trap is laid by most insurance companies.

A term insurance, with no survival benefit appears to have no financial return, and most of us believe that the money is wasted. And against this, other options, with some kind of return – money back, premium return etc appear more attractive. Return on insurance plan is not calculated mathematically, we must understand, the objective of insurance is to buy financial security for our loved ones, and that too highest security at lowest price and that’s the value proposition we should be looking at. Any other form of return only makes the cost of insurance higher and hence, based on our ability to pay premium, pushes the insurance amount lower. Also understand nothing comes for free, any return committed has a price. If we are looking for insurance as well as investment, we should invest the amount saved from lower premium into a separate investment product, and not club the two together.

What does this tell us, if we wish to cover the financial risks that life presents, and we want to ensure that our loved ones are financially secured, and have enough resources to pay for house, living, education and other important milestones of life then we need to insure ourselves and insure adequately.

And any insurance if bought at early stage of life in cheaper, has lower premium. Therefore, the golden rule is – buy term insurance as early in life as possible, probably as soon as you start your financial journey, and for a sum as large as possible and duration as long as possible. That’s not enough, as you move forward in life and add financial liabilities e.g. house mortgage, higher education for your child etc, re-evaluate if insurance amount needs to be increased to cover new financial responsibilities. Plan your future well and also plan your Insurance Cover adequately. This will ensure that in case of any eventuality, your family will have a house, children will have uninterrupted education and happily deal with all financial needs. Wish you a well insured life, happy living.