Term life insurance is a complete waste of money

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 Term life insurance is a complete waste of money…

Shocked? 

Touted as the greatest insurance because the premium is very low compared to the cover.


Example, a 25 year-old gets Rs. 1 crore cover until 60 years of age by paying Rs. 978 monthly.


Then why do I say it’s a waste of money. Read on:


If you only change the coverage to 99 years, the premium increases to Rs. 2,535.


You may say, what difference does Rs. 1,557 makes. I will be almost guaranteed of getting Rs. 1 crore. (money back syndrome)


Five problems with taking this approach:


1. Inflation – Your Rs. 1 crore cash at your 99 years of age, by simple maths, will be worth Rs. 1 lak today. Sounds like a rip off!


2. Balance amount of Rs. 1,557, invested monthly at 12% index return for next 40 years, will generate over Rs. 1.5 crore in hard cash, which you can use anytime. Buy a Mercedes with it!


3. Smaller premiums are easier to pay, and gets you better sleep. Nobody likes paying more!


4. By paying similar amount, you can increase your coverage amount to over Rs. 2 crore instead if taken until 60 years of age. More coverage is more peace of mind!


5. Ask yourself, why life insurance? To fulfill any financial obligations that your family might be left with if you leave them. If you have crossed the age of 60, you would already have made loads of money to ensure your family doesn’t suffer financially. Guess what, even your kids will be in their employable age, thereby reducing the financial burden even more.


Therefore, I complete the sentence in first line:


Term life insurance is a complete waste of money, if bought until 99 years of age, or similarly.


****


TL/DR:


1. Buy term insurance till your money-making years only (60 years usually).


2. Difference of premiums between coverage until 99 years and 60 years can either be invested for longer term or used to higher insurance amount.


3. Buy insurance for solving financial difficulties if something bad happens, not for money back.

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