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Is Term Insurance An Investment Or An Expense?

Is Term Insurance An Investment Or An Expense?

term insurance as investment

When it comes to giving money away, it is but natural to think of returns on investment. The same applies for insurance too. Many a times people put it in the same category as pure investment tools like say, mutual funds. However, you can’t exactly add term insurance to this list. Does that mean a term insurance policy is simply an expense? Not really. Let us see why.

What is term insurance?

As the name suggests, a term insurance policy offers life cover for a specific term which could be 5 years, 15 years, 20 years, etc. If the policyholder passes away within the policy term, their family will receive the sum assured, no matter at which point of the term death takes place.

For example, you take a policy of 15 years at the age of 25 years, with a sum assured of Rs.25 lakhs. You will have to keep paying regular premiums for the entire 15 years. If unfortunately, your death occurs at the age of 35, your family receives Rs.25 lakhs.

If you haven’t insured your family against such an untoward incident, you should definitely check out Canara HSBC Oriental Bank of Commerce’s iSelect Star Term Plan. This online term plan offers a minimum sum assured of Rs.25,00,000, along with the option of getting a cover for your spouse as well. It also offers the option of whole or part of the death benefit in the form of regular monthly income to the family.

The catch

The catch is that if you live out the policy term, there is no maturity benefit on completion of the term. You do have the option of renewing the policy for another few years. If death occurs within this extended period, your family still receives the sum assured.

What people usually think

  • Paying thousands of rupees each year with the possibility of not getting any of it back is futile.
  • What if I outlive the policy term and the need to use the sum assured never arises? That puts me in a loss.
  • If I want to safeguard my future, I can always put my money in a fixed deposit or a recurring deposit instead of a term insurance policy, and also earn interest on it.
  • It is too pessimistic to invest so much in an insurance policy against premature death.

The reality

Investment in security : It is important to understand that returns on investment cannot just be calculated in terms of a monetary benefit or profit. When you take a term insurance, you are investing in the safety and security of your family, especially when they are dependent on you. It is an investment in the mental peace that you get out of the assurance that your family will be taken care of.

Cost vs potential returns: Firstly, term policies are low-cost. The premiums are minimal while the sum assured is very high. Hence, outliving the policy term is not going to put you in a huge loss. Besides, you can always renew your policy and continue experiencing the security of a life cover.

Fixed deposit vs term insurance policy: A fixed deposit might sound like a good plan at the moment. However, the maturity amount that seems high at the moment, is not going to have the same value in say, a decade from now. Fixed deposits do not factor in inflation. On the other hand, a term insurance promises a high sum assured with low investment.

The unpredictability of the future: It might sound a little pessimistic to assume that you are going to be no more in the next few years. However, it is not impractical. It is a real possibility and if it arises, your family will be saved from at least one reason to worry, which is finance. Ensuring that they have this sense of stability and peace is only reasonable.

Financial freedom for family: There is no restriction on how your family spends the sum assured. They could use it for your last rites, rituals, educational expenses, daily needs, or anything else that they wish to. With plans that also offer to pay out a part or all of the sum assured in regular monthly payments, they will be secured and peaceful for the long run.

iSelect Term Insurance: Now that you know exactly why term insurance is a necessary investment, do not wait. Get an online term plan immediately. Canara HSBC Oriental Bank of Commerce’s iSelect Term Plan is one plan that offers a plethora of benefits like the option to increase cover every 5 years; optional built-in accidental death and accidental disability riders; tax benefits; and multiple payout options.

Speak to an insurance specialist now!

Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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