Term Plan or a ULIP or a endowment plan?🤔

Life Insurance simplified:

Do 're-tweet' & help us educate more investors

A Thread 🧵👇

What is life insurance?

Life insurance is a product which pays out a sum of money either on the death of the insured person or after a set period in return for a specified premium

What are different types of Life insurance?

Term Plan-Pure Risk Cover

Endowment Policies-Insurance Cover + Saving

Non-Linked Participating Endowment Plan-Insurance cover + Sum Assured

ULIP-Insurance + Investment Benefits

Non-participating ULIP-Fixed Insurance Cover

Which Insurance policy to buy?

Insurance is a pure product to hedge life risk.

Investments should never be made using insurance products❌

A pure play term plan is the only life insurance that one should buy!

What is term plan?

This is the simplest type of life insurance policy.

It pays your family a sum of money in case of your death, during the policy term.

It does not pay anything if you survive the policy term

Who should buy a term plan?

Have dependents, i.e non-earning family members ( eg children,retired parents)

Have loans that might burden your family, in case of your death

When to buy a term plan?

As soon as it is established that u have dependents.. buy a term plan!

The sooner u buy a term plan the cheaper it is!

As life goes on the risk of contracting a disease is also higher

Therefore buy a term plan as soon as possible

How long should be the term plan for?

The term plan should cover u as long as u have dependents on u.

Once u are free from all the duties there is no need for a term plan.

Ultra long term plan like one for 85 years have poor returns and are not recommended.

What should be a sufficient cover?

A sufficient cover will depend on ur living expense and ur goals.

Add up ur expenses and ur goals and any liability u may have.

That generally will be the cover that you may need.


Payout options:-

Entire cover is credited in one go!


Some amount is credited upfront while the rest is paid out as monthly income.


All the money is paid as monthly income

Choose a model that will help ur needs

Premium pay models:-

Companies provide the following options:-

-Pay over the lifetime of the insurance policy

-Limited Pay Options:-

Companies now offer an option to pay within 3-5 or 10 years.

You should calculate the NPV of each of the faster pay options to conclude the cheapest.

If u have the money and wish to not take on additional liability…then paying off the premium faster makes sense.

Critical Illness(CI) Rider:-

Companies provide a rider of accelerated payment of sum insured in case of any CI

These are inferior to a pure play CI cover

Rather than buying an embedded CI rider one must buy a standalone CI cover.

Waiver of premium on critical illness:-

This rider will help you waive the burden of paying ur premium in case u are diagnosed with a listed critical illness or are permanently disabled due to an accident

This is a must have rider as it will protect ur insurance.

Our 2 cents on Life Insurance

-Evaluate the need for a Life Insurance
-Buy only a term plan
-Be careful on the customizations
-Carefully evaluate the amount of cover,the age uptil which it should cover u.
-Disclose all the medical history to the best of ur knowledge


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