Which Insurance Plan to buy? "Term Insurance" Vs "Investment Plan" !

When you're considering life insurance, it's important to understand the real purpose of the policy. Term insurance is designed to provide financial protection for your family in case something happens to you. On the other hand, many people are sold insurance investment plans that promise a mix of life coverage and savings, but these come at a much higher cost. Let’s break this down so you can make an informed decision and avoid falling into common traps.

Let’s break this down:

Term Insurance Plan:

This is straightforward. For about $200 per year, you get $100,000 worth of life cover. Your family gets this money if something happens to you. It’s low-cost, and all you're doing is paying for protection. Over 25 years, you’ll spend about $5,000.

Insurance Investment Plan:

Here, you’re paying $2,000 per year for the same $100,000 life cover, but a large portion of this premium is actually going towards an investment. Over 25 years, you’ll pay a total of $50,000. The catch is that the investment returns are usually not great—often 4–6%—and the life cover is bundled with it, reducing the flexibility.

Also, agents push these plans because they earn higher commissions from them, often making them a lot more expensive for you while not providing the best returns.

Investing the Difference:

Now, if you opt for a term plan, you only spend $200 on insurance each year. If you take the difference ($1,800 annually) and invest it in a mutual fund or another investment that earns around 10% per year, by the end of 25 years, that $1,800 annual investment could grow to nearly $148,000!

This gives you a much bigger return than what you'd likely get from an insurance investment plan, plus you still have the life cover for $100,000 through your term plan.

Why This Matters

Insurance agents often promote investment-linked policies because they get paid a higher commission. While the idea of combining life insurance and savings in one product might seem appealing, it’s usually not the best deal for you as a customer. Your goal with life insurance should be to protect your family from financial risk, and with an insurance investment plan, a big chunk of what you're paying is going towards investments that may not give you great returns.

By choosing term insurance and investing the difference, you take control of your investments, potentially earn much higher returns, and still keep your family protected. It's a smarter, more flexible way to manage your money while safeguarding against life risks.

Always remember: Life insurance should be about protection first, not about combining insurance with investments.