✅ Insurance Is for Protection, Not Returns — Why Every Family Must Have a Term Plan
Most Indian families believe that buying insurance is an investment.
We choose policies that offer “money back,” “bonus,” or “maturity value.”
But the truth is simple:
👉 Insurance is NOT for returns.
Insurance is for protection.
If your family depends on your income, a term plan is one of the most important financial tools you must have.
🧍♂️ The Common Mistake Most Families Make
Meet Rakesh, a 35-year-old earning ₹60,000 per month.
Every year he pays ₹50,000 for a traditional endowment policy that promises:
-
₹10 lakh after 20 years
-
Only ₹5 lakh life cover right now
Rakesh thinks he is “investing” and “insured.”
But here’s the reality:
If something happens to him tomorrow, his family gets only ₹5 lakh — not even enough for one year of expenses.
This is the mistake most families make.
They buy insurance for returns, not for protection.
🛡️ The Smarter Option: Term Plan + SIP
What if Rakesh did this instead?
✅ 1. Buy a Pure Term Insurance Plan
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Life cover: ₹1 crore
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Annual premium: ₹12,000
✅ 2. Invest the Remaining ₹38,000
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Mutual fund SIP
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Expected return: 10–12% per year
After 20 years, this SIP can grow to ₹25–30 lakh,
and his family stays protected with ₹1 crore cover throughout.
📊 Traditional Policy vs Term Plan + SIP (Same ₹50,000 Budget)
| Option | Life Cover | Returns After 20 Years |
|---|---|---|
| Traditional Policy | ₹5 lakh | ₹10 lakh |
| Term Plan + SIP | ₹1 crore | ₹25–30 lakh |
Which one truly protects your family?
📘 What Is Term Insurance?
A term plan is the simplest and most affordable form of life insurance.
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No maturity value
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Highest coverage at lowest premium
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Protects your family’s income
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Perfect for parents & young earners
If you survive the term — great!
You stay healthy and continue your investments.
⚖️ Why Mixing Insurance + Investment Is a Bad Deal
Traditional policies often give:
❌ Low returns (4–5%)
❌ Very small coverage (₹5–10 lakh)
❌ Long lock-in (15–20 years)
❌ Hidden charges
❌ No flexibility to stop or change
These plans benefit agents, not policyholders.
🪙 Insurance Is for Protection. Investment Is for Growth.
When you separate both, you get the best results.
| Purpose | Product | Benefit |
|---|---|---|
| Family Protection | Term Insurance | High cover, peace of mind |
| Wealth Creation | SIP / PPF / NPS | Compounding returns |
This simple combination builds a safer financial future.
💡 How Much Term Insurance Should You Take?
A simple rule:
Buy 10–15 times your annual income
Example:
If income = ₹6 lakh/year → cover should be ₹60–90 lakh.
Also consider:
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Your loans
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Children’s education
-
Family lifestyle
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Your age (younger = cheaper premium)
Choose Level Cover (not decreasing cover) for stability.
🚫 Avoid These Common Mistakes
❌ Buying without comparing companies
❌ Choosing short tenure to reduce premium
❌ Hiding medical history (leads to rejection)
❌ Not updating nominee name
❌ Taking return-based plans thinking they are safer
✅ FinPath Takeaway
Insurance is not about returns.
Insurance is about responsibility.
A term plan protects your family when life takes an unexpected turn.
Investing the remaining money separately helps build long-term wealth.
Before buying another “money-back” policy, ask yourself:
👉 Am I protecting my family, or just buying a low-return product?
🪙 Next on FinPath India
In the next article, we will explain:
“How Much Term Insurance Do You Actually Need — and How to Choose the Right Company?”
Stay connected for simple, genuine, and practical financial guidance for every Indian family.
“Also read: How One Hospital Bill Can Ruin Your Finances — The Truth About Health Insurance”
Must read: How to Choose the Right Health Insurance Policy in India (Simple Guide for Every Family)
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