What is Insurance – Is insurance an investment or an expense?

What is Insurance & why we need Insurance is normally misunderstood by Indians? Most of the time, when we ask any investor about his investment portfolio, he/she invariably land up saying that we have investments in some sort of insurances policy in LIC, ULIPs, Endowment Policy, Money Back Policy etc. In fact, over the last 50 years or so, LIC has taught Indians everything other than insurance. We all understand insurance as Tax Saving Instrument, Investment Tool but do we understand Insurance as Insurance. You must be surprised by our sentence, but that is the hardcore fact of life.

What is Insurance?

It is a contract between the insured and the insurance company whereby the insured financial risk is covered by the insurance company. The risk can be of your vehicle, property, legal, etc. So effectively, you pass on the risk to the insurances company and they charge you a nominal sum of money for taking that risk which is called  Insurance Premium.

What is Insurance - Is insurance an investment or an expense_

Why Insurance?

It is said that Rama, Krishna, Bhishma, and Buddha, knew the time when they would leave this world. To put simply, each of them come to live with their disciples with a mission or set of responsibility to fulfill. Does any one of us know when something will go wrong with us and whether that time our responsibilities to fulfill? Does any one of us know when something will go wrong with us and whether that time our responsibilities would be over or not? We all know that in life unexpected is always expected. Our life is full of uncertainties with a lot of goals, short-term goals, long term goals, known goals – unknown goals. We are all born with some responsibilities to fulfill…..but we do not know how much time we will get to fulfill those responsibilities.

What if anything goes wrong with us, who will provide financial security to the family. Who will fulfill all the dreams that you would have thought for? This is where it can help you. Insurances are one of the greatest inventions in the field of personal financial products. But it becomes fatal to financial life and costly once you end purchasing the wrong insurance solution.

Read- Best investment options for senior citizens India

What Happens in Real Life?

The answer to this lies in 2 questions “why did I buy this insurance” and “what product I bought”. Typically you buy insurances products as investments and not insurance. That is why we say that Indians have actually not understood insurances in the right sense. First of all, less than 5% of the Indians have a policy, and add to this, out of those who are insured, the average life insurances cover is less than Rs. 90000/-.

We all understand insurance as an investment and land up buying EXPENSIVE Product. We all buy Endowment Money Back. ULIPs etc. Now when you buy an expensive product, you will actually be the loser, and the manufacturer and the middlemen will be the winner. Is it not? All one needs is to have a simple Term Insurance Policy/ Term Life Insurance Plan.

Mixing Insurance & Investment

Why Insurance

Check – What is Mutual Fund?

Mixing insurance and investment is something we should totally avoid. When your insurance agent chase you, does he sell you insurance products? Or does he offer you investment opportunities and tax-saving schemes? In 99 of the 100 cases, agents don’t sell pure insurance. The insurance agents are driven by the first-year commission that they get and they are hardly bothered whether or not it is really right for you or not. In fact, that is the reason, why most of the investors we meet, say that they don’t see their agents after the first premium. They make a heavy commission by selling the product. Now we don’t have to explain that the commission that they make is actually deducted out of your investment and it could be as high as 70% of your premium.

Insurance is an Expense

Let’s try to answer the question through an analogy. Do you know that the world’s tallest building Burj Khalifa at Dubai, which is 828 meters high and has a foundation of 320 meters below the earth level made out of concrete and stainless steel. This means that to see a masterpiece you need to invest in its foundation. And we all know the foundation has no visibility but it is a major part of the cost. So any expense which gives a foothold and acts as security towards unforeseen circumstances is worth spending.

Similarly is life insurance. We all must buy simple insurance even before we start thinking of investing for the future. Understanding insurances as an investment or mixing insurance & investment is not a wise decision.

Please Add Your Comment: Share your views about What is Insurance? Your comments will help us to write better in the future.


    • You must be crazy to have such views.

      Did you have a look at the traditional endowment plans that we used to have earlier and still have around us. Did you ever have a look at the returns that one used to get from them and what returns can you expect from them even now?

      Ulips are expensive then MF but they are much much much better than other endowment plans. Try to understand these plans and do not just bash ULIPS just for the sake of participation in ULIP bashing binge.

      • Rakesh
        I agree with you, people must understand like DD …..Likhneka hai isli ye kuch bhi mat likho. For common man don;t understand the risk of share market, atleast LIC help them to earn better returns than conventional plan. The combinaation of ULIP and Traditional plan will be better for average income group who doon’t want to take euity market risk.

      • Please provide the name of plans and their respective returns to its policyholders.. There are no such ulips or endowment plans which provide returns even higher than a bank fd. Stop trapping people . I guess you might be an agent selling such bad policies.

  1. very well written with nice analogies. Insurance that is being sold is truly not insurance. Having worked in a private sector bank, I can truly relate to the message of this article. Insurance is one of the longest and most successful frauds being conducted. the marketing and advertising of some of the inurance companies is the best in the industry with a great emotional connect (child’s education, daughter’s wedding, etc)

    • Dattaraj

      Thats a great point you have raised . Companies advertise on themes which is like dreams of tyical indian mindset , like have a great retirement without any ones support “Sar utha kar jiyo” 🙂 . Pure emotional exploit .


    • @ Dattraj

      Thanks for sharing your experience.

      Insurance agents & banker try to do “Emotional Attyachar” but client think this is in his benefit. LOL

  2. Hello,

    It is true that Insurance Agents are there to earn money. Even in my 30 years of life I have never met any agent who talked me about Pure Term Plan. I myself become an Agent and I am selling only Pure Term Insurance. I beleive a person must have a Term Plan in his portfolio which should be atleast 7 times his total Annual Income.

    Good Article.

    • Hi Nilesh,

      Well said i am looking for a term plan can u advise let me ve y contact details if possible.


  3. Dear Nilesh,
    Good to know that you are following a prudent practise of selling only pure insurance. We still feel that agent shun from this topic and avoid this discussion. According to me being silent is also encouraging expliotation. That is the reason we are reaching masses to keep this point. If you have any idea, which we can follow to curb mis-selling in insurance, do let us know.

  4. Nilesh Panchal is according to me “A TRUE INDIAN”. Even I have been running from piller to post to see an agent who can convince me about a pure term insurance product. And in 2004 I came across a comparison ( in a well known personal finance magazine with more than 10 years reputation now) of then available pure term insurances offered by a dozens of insurance companies including LIC.
    I could zero in with a term product offered by SBI life, in which the sum assured get increased by 50% after every 5 years with out any change in the premium amount.
    We need agents like Nilesh Panchal to educate the 95% of the Indian population who lack insurance literacy.

    • Mr.Ajith, it goes without saying that SBI advisors educate their prospective clients on the right kind of product required by them. However in the past there was only one company and that was LIC. In every street there is an advisor and due to competition between advisors many a times misselling took place. With Insurance sector opened up in India, advisors strength multiplied and more competion rules the day. One has to be true in his profession, what ever it may be. For example at SBI Life we are taught how to sell a product in the right manner, no sugar coating, no emotion selling but bring out the facts – say for example if we propose a Child Plan for educational purpose we tell the prospective father what would be the cost of education 10 years from now or 11 years or 12 years depending on the childs age and inflation of 6% to 7% and tell them what the plan is about and how it would help the parent to meet the future requirements. No force selling or sweet selling or emotional selling. Its pure fact selling. That’s SBI. I am proud that I am part of SBI Life.

    • Mr.Ajit, u r right, there r many such kind of gud plans from the stable of SBI, like the term plan which u have chosen there is another plan as well which is really beneficial on the long run. Send me a mail if u r interested since I am an advisor in SBI Life, sell what is needed by the customer and not sell by how much I can earn out of his purchase.

  5. sir i want to insure my life worth 1 caror
    so please suggest me hw to get term insurence & mediclame


    • Hi,
      As I have studied so many cases regarding this matter, In indian culture yes endowment is an good investment tool where no one can fulfill the whole term except life insurance policy.

  6. I regularly reads your blog, it’s really good. I want to know about SBI subh nivesh policy(If I invest 20000 in it for 10 years). I also have ppf account & Rs 2000 mutual fund SIP.

    • Hi Aditi

      It’s good to hear that you are regularly reading our articles & upgrading your knowledge. But it was bit sad that still you are asking details regarding an insurance policy for investment purpose. We always keep saying that one should not mix insurance with investment. SBI insurance Shubh Nivesh is an endowment plan where only added feature is you can convert it in whole life policy. Expected returns will range in between 5-6% which will not be enough to even beet inflation. My suggestion is you have made a good portfolio through PPF & Mutual Fund SIP keep adding money to it rather than trying new things. As you are planning to invest Rs 20000 – you can start one more SIP of Rs 1000 every month, take term plan for insurance need & put the remaining amount in PPF.

      • Mr.Hemant, At times I keep wondering why people think that insurance is an expense and not an investment, I totally disagree. Yes there r people who mis-sell insurance for their beneficial needs, but then insurance is not at all an expense it is a small investment. Now lets luk into this classic example which I have been telling every customer of mine : Mr.XYZ is a IIT graduate with a monthly pay packet of INR.300,000. He is responsible in many ways in his job profile and its a rewarding job when he n his team members execute their projects in time everytime with least hitches. Now luk at his profile, he being responsible, definitely it is tensional and strenuous job, unfortunately he was a BP patient which he came to know at a very late stage. Imagine what can happen to his family if he wud not have taken a insurance policy for a reasonable amount atleast to an extent of his life value. If he wud have invested in Mutual funds, SIPs and PPF what are his returns in the short run. U only get ur investment + some extra peanuts, definitely not Cashewnuts. Hence it is prudence to put a reasonable amount in Insurance as well. Do u agree with me. By this I do not advocate that everyone should invest only in Insurance, it should be a gud mix of all kinds of investments. Isn’t it.

        • “By this I do not advocate that everyone should invest only in Insurance”

          Insurance is not an investment .
          If you read the article properly, You can do you Investment separately
          Don’t club investment with Insurance.

          Insure yourself with a Term Plan
          Invest in Debt /Equities either Directly or though good Mutual Funds

  7. I have Bajaj alliance. ULIP unit gain since 2007 Premium 10.000/- ULIP ki tulna me ye kaisha hai? Mujhe esko surrender or premium continue karma chahiye ya nahi?

    • Hi Vedprakash

      ULIPs are expensive and complicated investment products. The investment is similar to mutual fund products and policy holder is allotted units based on which his returns are calculated. An investor seldom understands the language and set up of ULIPs, whereas mutual funds are far easy to understand. When you purchased that policy there were high upfront commissions of 40-50% this means that there is high probability that your total fund value will be still lower than your investment. My suggestion is you should immediately discontinue this policy – if there are no surrender charges withdraw you amount & start investing in mutual funds.

      • Hemant it is not true that Mutual Funds are far better than ULIPs. When u purchase a Mutual Fund which invests in equities, u stay put in it. NAV rises when the market is in bulls phase. When the market starts falling your NAV is pulled down day by day, the Fund manage has to reshuffle the portfolio of equities else no chance of rising NAV. On the other hand if you would have invested in ULIPs in a good insurance company you would have had the choice of different kinds of funds in which you can switch over from time to time. In my view ULIPs is for a person who has a risk apetite and knows about equity market or good advisor friend who can advise him from time to time. Alternatively ask for all details before investment (browse net) before investment and stay put for a minimum of 1 full cycle of UP and DOWN that is atleast 6 to 8 years. If you want your investment to be safe then choose the Guarnteed funds. However if you want to play safe only tradational products are the best. For further information I would be happy to inform and available on

  8. Hi
    It is very painful to see that lakhs of people loosing their hard earned money on these types of plans, which are not at all beneficial to the customer. In such cases, the customer is not getting adequate insurance cover, eventhough he is paying huge premium year after year. I fully agree with TFL that insurance should be treated as an expense only and not as a savings.The customer should first go for a Term Assurance of a decent value and then start saving as per the asset allocation, matching his profile. This will ensure enough financial security to the family in both the situations, ie . if he is alive or dying in between.

  9. Hi,
    First of all i think i’m lucky to find your blog the same time i start earning! I’m 25 now, want to start a term insurance plan. Sbi life or lic? Do they cover only death or permanent disability also? Thanx 🙂

  10. Hi Hemant,

    Great article.

    I have a Metlife insurance policy with a cover of 1cr up until 99yrs, where I have to pay a yearly premium of 5lacs. This I was told can do for 3 years and then discontinue. I was quite wary of the charges and hence tracked it, out of the first premium around 4.7lacs were invested, hence I thought it was a good deal.

    Also, I selected the fund type for this ULIP to be in Moderate type (i.e. Debt funds), as I wanted the capital to be secure and did not expect to get huge returns from this.

    I understand that to be able to get the 1cr cover, my total value of the policy should be 120% of the first year premium, hence I plan to discontinue the premiums after the 3rd year, as it will take care of the above.

    Can you please advise if I am on the right track of have to go for a term plan still.


    • Hi Hiten,

      You have not mentioned the name of the product but I think you are talking about whole life ulip. I don’t want you to disappoint but as you have asked my advice – I should explain you few things.
      Expenses: You have mentioned that only 30000 was deducted as allocation charges in 1st year. But this not the only charge you have pay list is too long but specially check the policy maintenance charges.
      Insurance: Insurance is taken that if I am not there my income is replaced. But tell me why we need it after your retirement.
      Cover: It’s good that you have taken a 1 crore cover but if you would have taken it through term plan it would have been 12000-20000 per year(assuming age 30-32). One more thing what I can see is 1 crore is not sufficient for you – as you are paying Rs 5 lakh premium you must be earning Rs 12-15 lakh per year.(not less that) In such case your cover should be Rs 1.5-2 crore.
      Investment in moderate fund: When your horizon is upto age off 99 what’s the use of keeping this fund in debt – you can aggressively invest in equity.

      In case you have any question feel free to ask.

  11. Dear Hemanth,

    I have read all of your articles on insurance and investments, i pretty well know that Insurance + Investment is Junk. But i was not able to convince him that TATA AIG MAHALIFE GOLD is not a good plan. I would request you to put some light on TATA AIG MAHALIFE GOLD plan.


  12. Dear Mr Hemanth,

    Your explanation is precise in regard to Insurance as an ‘Investment and as well as Insurance’.
    Its an eye opening to me about the real fact of insurance agents!
    Sir, could you please elucidate the difference between insurance agents and broker. I shall be grateful.


  13. Hi,Hemanth
    Its a great initiative to educate customers on what is good investment and what is not good.
    .But I clearly see that some of the statements are superficially made and doesn’t have any back up .for example No ulip in current market is giving a commission of more than 8% and the average industry commission for the first year is 5% .From the second yr its between 1-2 %. You talk so much negative about ulips only because, how they have been sold in last 5 yrs . but if you suggest them rightly they are better instruments than MFS. If you check last 5 yr performance of top ulip funds and top MF Equity funds .ULIPS are better performing funds .If you take a time horizon of 15 or 20 yrs ,
    ULIPS beat MFs in their expense ratio,MFs expense ratio is 2.75%-3% where in ulips expense ratio is between 1.5%-2%.No doubt MFS are good in short term but If you take consideration of the facts like lower FMC ,the flexibility of shifting your investments between different asset classes with in the same product,if you are looking to create corpus for your long term objectives like retirement corpus or child education, the current class of ULIPS stand a fair chance as an investment. Finally why dont you question the MFS to show their charges as transparent as ULIPS . The biggest charge in these both investments id fund management charges .Please compare two similar investment amount s one into ULIP and another one into MFS . Keep the time horizon as 15 or 20 yrs then pls check the charges effect on net yield of the both the investments.

    • Hi Vijay,

      Just check when this article was published. And still expenses are not less in ULIPs.

      And what about other limitation where you have stick with particular insurance co. even if its funds are not performing.

    • I totally agree that Insurance is not for investments. Definitely not. The first thing to notice is that in today’s business world, very few knows the real meaning of insurance. Insurance means protection not returns on investments.If the policyholder dies, than the insurance company pays the life cover amount to the nominee. It is an agreement between the Insured and Insurer. Mutual funds, on the other hands, are the real investment products. Mutual funds are govern by SEBI and Insurance is govern by IRDA. The most important thing is the that term “Portfolio” is always used for MF’s. Insurance do not have any portfolio. Insurance do not have any relation with the stock markets. MF’s are indirect entry to the stock markets. I dont understand what the insurance companies have to do with the stock markets. No body needs to take insurance to enter the stock markets. Mutual funds rules are very flexible and easy to invest. Even if you are not able to pay any month SIP than there is no problem. But if you do not pay any month premium than you can imagine how the insurance company torture you. The lock in period is for three year only but in insurance it is five years. And even after that surrender charges are there. Insurance is only for mental tensions and nothing else. Do not misguided the people by saying that insurance is best.

  14. I totally agree with your views. Insurance must be taken as an expense instead of investment. I am glad to find this article.

  15. Insurance is a safety net. In monsoon when we leave our home, we carry umbrella or raincoat. It may not rain at all, but if it does it will keep us dry. We need to look at insurance in the same way – a safety net to keep us and our loved ones protected against life’s uncertainties.

  16. Hi Hemanth,
    Its a good article.
    But I want to make a point here and that is the Indian mentality.
    Indian Investor would like to have some return on the Investment which he pays towards Insurance as a Premium.
    Insurance agreed have a Front end charge but if the entire policy term is complete it will still work ou cheaper ( in case of ULIP ) as compared to Mutual Funds.
    Insurance as a Investment will ensure financial Discipline among the Investor.
    As you said there are no free meals hence the works in Insurance, Insurance might cost bit higher than other Financial Instruments but its beneficial in a long run therefore the decision need to be left with the individual what exactly he needs do with his money.

  17. Hi Hemant,

    Life Insurance offered by ICICI. I have heard about ICICI term plan which is popular by name as “ICICI Pru iProtect” but when I visited the website and found below Term Plan Products:
    ICICI Pru iProtect
    ICICI Pru Pure Protect
    ICICI Pru LifeGuard
    ICICI Pru Home Assure
    I didn’t understand the exact difference in these four products/plans.
    I don’t understand why there is much difference in premium per annum in these four products while the company and product is same the only thing is plans are different. But I din’t understand what is the beneficial difference in these four plans. Can you please help me to understand so that I can choose the correct one as per my requirement and go ahead as soon as possible.

    Kindly advise for the “ICICI Pru iProtect” – Option II
    This plan offers term life insurance as well as additional accidental insurance.


    • Hi Ashish,
      iprotect in online term plan & home assurance is to cover home loan. Other 2 are differentiated on maximum sum assured one can take.
      My suggestion will be to have a term plan without accidental rider.

      • Hi Hemanth..
        thanx for d informative note.

        SBI Shield offers riders like
        1. Critical illness
        2. Accidental death benefit
        3. Disability benefit .

        As u said above should we not take d riders and of yes why??

  18. Hi Hemant,

    Thanks for the reply!

    I got your point that one should go for two different products (1) Life Insurance – Term Plan (2) Accidental Insurance. One should not mix these two products like many people mix Insurance and Investments (ULIPs) 🙂

    Well, I still have many queries :

    (1) Can Accidental Insurance premium be considered for tax benefit under 80c or any other section. I hope, Health insurance premium is considered in different section than 80c. The same way can we avail the tax benefit for accidental insuracne?

    (2) As you advised that iProtect is online term plan. What does it mean and should one avoid this product? If yes, why?

    (3) ICICI Pru Home Assure is to conver Home Loan so one should avoid this plan for pure term plan life insurance perspective. Right ?

    (4) ICICI Pru LifeGuard offers maximum sum assured of Rs. 10 lacs. So one should avoid this plan if he needs sum assured more than 10 lacs. Right ?

    (5) ICICI Pru Pure Protect Classic offers maximum sum assured of below Rs. 25 lacs. So this is also not applicable for those looking for sum assured more than 25 lacs. Right?

    (6) ICICI Pru PurePru Protect Elite offers sum assured with no limit. One can choose a sum assured of his/her choice. Kindly advise for this product plan. Is this right product to go for or not?

    (7) I see that there is a much much difference in the premium for ICICI Pru iProtect & ICICI Pru PurePru Protect Elite. We just need to pay about Rs. 9000/- in case of iProtect and Rs. 20000/- in case of Pure Protect Elite. I feel that beneficiary benefits in these two plans are same as insured’s family will get the sum assured in case of death of insured person. Then why there is difference in the premium amout ? More than double. Why?

    Kindly advise for this and forgive me if I am wrong anywhere.


  19. Hi TFL,

    Amazing article for beginners to understand what exactly insurance is in real context. Great going!!!


  20. Hi,

    A very nice and informative article on insurance it clears various fundas. Would request your advise on the following :

    I am 40 yr old would like to take a 50 lac term plan ve shorlisted LIC Premium is Rs 33850 v/s Aviva i life is Rs 13547. The objective of term plan is to protect o/s home loans in case of an eventuality. Do u think one can take the risk with a new player like Aviva, stick to LIC or take a mix of both pls advise.


    • Hi Pawan,
      Its good that you are thinking for a term plan.
      I will suggest you to go with ICICI – I CARE & Kotak Preferred E term plan online term plan which will take care for an eventuality (protection of home loan). I will suggest you to distribute equally to the above policy mentioned policies.
      Yes, I think the risk can be taken with a new player but it will need your help as well because most of the claims are being rejected through the details provided by us in a policy form,if we provide the details in a utmost good faith the claim will not be rejected by the company.

  21. Dear Mr.Hemant,
    Why donot we look at this way. In term insurance generally no returns from the premium you pay but the risk is covered as adequate as required based on the premium. But an endowment product is just not driven by the commision, it also helps the insured to cover risk moderately and also get back some handsome amount if there is no risk for which it is covered. So why not we consider this just not as insurance but also investment to an extent. Imagine if one does not have a insurance policy taken, wud he not have spent that amount for either purpose or unpurpose expenditure. Today there are so many malls which have sprung up with the young population flocking towards them to spend unmindfully. I really do not know how many wud agree with me but this is how I see Insurance as a little bit of savings/insvestment as well.


    • Hi Sunku,

      Before making any comment as a reply to your input, I would request you to go through this page article with the open and cool mind once again. I hope, there would no more need to reply your query.

      Happy reading and understanding… 🙂


  22. Hello sir,

    I am 30 yr old ..working in mnc co. I want to invest Rs.2000/-pm… and I would like to know which policy is better…whether pension plan or mutual fund or life insurance… Pls sugest me’


    • Hi Prasad,

      Its good that you want to invest a sum of Rs 2000 and you should invest this amount through mutual fund for a long term horizon.

  23. I have a 11yrs old son, I want to invest some money for him so that he can have some good amount in his 22/23 yrs old of age. One time Investment or annual premium, both are fine with me. I can Invest 50000 per year. Suggest me some plans. Thank you.

    • Hi Madhuri,

      I will suggest you to invest your money through SIP (MUTUAL FUNDS) that will be the best route if you want to have this money for your child.Do not have child plans from Insurance company as they are cheaper and the expected returns are not more than (5-6)%.

    • Hi Madhuri,

      I m not the best person for this.
      I will suggest you to have a road map which will leadyou to your goalsand that is possible by having proper Financial Planning & for this I will suggest you to Contact Mr. Hemant Beniwal

  24. Hi,

    I want to invest Rs.2000/-pm… and I would like to know which policy is better…whether pension plan or mutual fund or life insurance… Pls sugest me’


  25. Great article! Any suggestions for the best way out of a costly ULIP (specifically HDFC Suvidha)? Wait it out for the 10 year term? Or withdraw as soon as allowed by plan (5 years)?

  26. I would like to invest around 2k per month for tax exemption purpose and long term(10-15yr) good returns. Please advise me me . is there any gud mutual fund or pension plan or anything?

  27. your article is a must read for everyone as misselling is rampant across companies. i bought a term plan from HDFC which was cleared by them after a looong time of deliberations by the under writers. i am a pilot in the air force and getting a term plan is virtually impossible for me as mosst companies get cold feet when they come to knoe bout my profession. The biggest problem with the human mind is that it starts calculating the amount one would lose over the term of the policy if he/she were to survive and associates the transaction as loss making. To this, my friend rightly put the term plan in perspective when we recently had a discussion with our colleagues who believed it to be loss making–he sais if you want to profit from it, then go and die. what say?

  28. Hi Hemant,
    It was nice reading all your inputs on Insurance planning, but I found in one of your reply tht you were suggesting Tata Mahalife policy I guess this policy is similiar kind of lic’s jeevan tarang, I guess even this plan is very expensive , instead we can use STP option in a Good Mf like a balanced fund. Still we can endup getting good returns of close to 11-12%. Tata mahalife & jeevan tarang are very expensive plans with long lock in periods.

    Mahesh Kumar P.

  29. TFL…any comments / suggestions on HDFC Lfe’s Crest plan. I have a term plan cover of 5 times my annual income and some others like Jeevan Shree, Saral. Is Crest a good option still..with the max. NAV returns feature. And how would this be vs. an invenstment done in MFs(please suggest which MFs should one select to beat returns from Crest ). I can invest Rs.1,00,000/ year for 5 year. Need returns after 10 years.

    • Hi Abhi,
      It was not a wise decision to buy all these policies but now don’t ask my views. Do you own research – it will be of immense help in your financial life. Do some research regarding these polices & ask yourself:
      1. Should I continue
      2. Should I surrender
      3. Should I make this paid-up

  30. im lucky to find this blog,for the past three days i spent most of my leisure time here..ok as far as insurance is concern, please advise me that insurance where the rate depends on govt securities will become a loss for me????..im talking about idbi federal incomesurance


    • Thanks Stan 🙂
      I have not researched this particular product but Prima Facie it is a very complex product.

  31. Hi Hemant,

    What are your views on LIC Jeevan Saral?
    Can you tell me the difference between yield and rate of interest?

    Thank & Regards,

    • Hi Anudeep,
      I can’t comment on every policy but endowment plans will not generate more that inflation.
      There is difference between yield & interest but most of the times people use it interchangeably.

  32. The wounder full, I got about the agent but the new process they states that online buying, which they are convenceing that a clint will get the 30% more amount benefit on sumassured other then the Maturity Amount. Pl correction is it right?

  33. Thanks for sharing the knowledge of insurance but I have some facts/doubts.
    1) No insurance agent is interested in selling pure insurance. I am following up with a LIC agent but he is always telling me the problems in such insurance.
    2) Since such insurance is of high sum assured at very nominal premium, risk of finding reasons of not to pay after mishappening by insurance agencies are very high, especially with private insurers.
    3) Lack of transparency – After medical tests, insurance agencies increases the premium without telling the reason or sharing the medical report and very much interested that customer deny.

    Under above mentioned circumstances, is it really wise to go for such insurance where you know that you are paying premiums knowing that there are very few chances that your family will get something after your death.

    • Hi Umesh,
      Fully agree with your first point.
      But I think your point 2-3 are based on some misconception or influence by your agent.
      Point 2 – risk for insurance company is same in case of any type of insurance that a person buy + most of the policies with higher insurance are re-insured. For debate between Private Vs LIC read comments on this post
      Point 3 – when we buy insurance policy we actually make a proposal to insurance company – rejecting or accepting with or without reason is their decision. Accepting offer with increased premium is your decision – if you think that new terms are not acceptable, you can reach to some other insurer.

  34. hi hemant,
    I wanna know that whether it is safe to invest in Idbi Federal incomesurance endowment and money back plan. as i am not sure whether they can provide so much of benefit in one policy. It rather seemsto me that the benefit shown are not much higher than they announce. pls help me in that. i need your suggestion.

  35. Once again thanx for the article. It is very sad to say that not a single LIC agent has told about the term plan till date to me though I got the idea of it a few months back but alas I had also taken the insurance policies thinking it to be a safe and secured investment with a decent returns. But now I know how a foolish I had been taking 12 lic policies giving about Rs. 50000 annual premium and with a total sum assurance of only Rs. 6lacs. But never mind Ihave recently told my younger brother to take a term plan and he instantly understood the meaning of it and took a term plan of Rs 50 lacs. Now I have decided to give this advice to all and sundry.

    • Hi Anup,
      That will be a great noble work if you will do.
      Manshu from onemint recently said “When you ponder about these things for long you wonder about what role a blog plays in the midst of this environment, and I think more than a blog – a blog reader can make a lot of difference. This is because if you’re the kind of person who follows personal finance blogs you are probably the one in your family and circle of friends that are approached when people need a bit of advice related to money. If you are that person, then imagine how easy it is for you to help someone avoid making a mistake and make a better decision.”

  36. Hi Hemant,

    Very recently I got the exact difference b/w an Insurance and Investment. I need an answer for my below questions which I have quoted as per my understanding:
    1. Is it Life insurance are exactly like our Vehicle Insurance?
    2. I mean, we will be paying the premium every year. Only if any thing happens, we will get the returns? (like how we get it for vehicles)


  37. I have observed that As per your view LIC is not Real Place to Invest so kindly advice me where to invest. I am doing service at Pvt Firm so what is better for me? LIC income is Tax free so it is not suitable?

  38. i have 3 policies of postal life insurance and paying a premium of Rs 54,000 annualy. post office employee told me Rs 70 per thousand per annum interest and making it total of 22 lakh after investing Rs 10 lakhs, its totally 4 investment purpose. i am in govt service and govt providing me home loan at an interest rate of 8.5 %. if i invest same amout in property by taking home loan. what about this deal? please suggest me

    • Dear Dharam,
      I have my doubts on the returns that post office employees are telling you.
      Regarding investment in property through loan – it is a leveraged investment so a double edge sword.

  39. Hi Hemant,

    Would like to congratulate you on such an informative & eye opener blog. Definitely it would be helpful to all…
    Would request for a suggestion on the following requirement :
    I would be 41y next month, & have a monthly take home of 35K per month. (post making a savings of 1 L for tax purposes). Have a spare income of approx. 5K per month.
    As suggested, I would like to buy a term plan for say 75 L. There are suggestions that one should not buy from one insurance co., fears being that what happens if the claim is rejected upon need. Instead, one should split the requirement in 2 parts. ie : 40 L x 2 different companies. The premium would be slightly higher, but is it advisable to go after 2 different companies ?
    Should one also take critical illness & or accident riders along ? If not, how costly is it if one buys these covers separately ? I have already got a mediclaim family floater policy for 7 L for my family (wife, 1 kid 9 y & my mother 62 y).
    Over & above the term plan, would it be advisable to buy a retirement plan & child plan (these plans also offer insurance along for small amounts), or I should invest in MF SIPs (with balance of Equity & Debt with increasing age) ?

    Thanks in advance….

  40. Hey Dharan

    Insurance is an investment,this is one of the simplest way to hedge some unexpected misfortune,which you might encounter at any point in time.
    There are many kinds of insurance,home ,life ,car insurance etc.The point is that, you have to identify the right insurance ,that will satisfy your need.Eveluate the detail to know the potential outcome before making the deal.

    • SASI,
      You can invest in Mutual funds SIP’s , i suggest you to invest in any good fund in Reliance mutual funds & make it in SIP INSURE, you will be benefited for Mutual funds & you will get insurance for Free of cost. Make sure you have to invest for a long time in this funds.

      All the Best.

  41. TQ. That was just a wonderful explanation. It cleared my doubts abt LIC, in particular and Insurance matters, in general. Tx once again

  42. hi hemant!
    im 50 yrs old. can u suggest some pension plans so that i get monthly income after my retirement? if i invest 20000 /month now, how much should i expect after my retirement at 60?

  43. I dont agree with your prescription on Life Insurnace as a Insurance Only.this may be true for the elite Class who hav eamassed disproportionate wealth &who can bank upon it for 3or 4 Generations. But in acounyty like India with overwhelming majority in the middle class &lower middle class, who cant afford to earn afast buck investing in Real Estate, Equity(that is also risky these days) ,Gold etc ,the thrift habit inculcated by LIC has created a modicum of comfort at old age of the teeming fellow countrymen.Kindly take a wholistic view before giving your Opinions on savings&Insurance as a Combo Product.The elitist Philosophy of Western World should not be blindly applied to Indian Conditions.When LIC has sent me an advance Cheque for the Jeevan Chaya Policy,maturing on 28th March, whichI took for my Daughter’s Education, I really felt Elated. It is not the % of returns that I calculate at this juncture,but the fact that a Planned Need has been fulfilled.Kudos to LIC for satiating the Economic Needs of Crores of Families in the Noblest Way

  44. Simple and easy to understand. This is the best article I have read about complex and important matter, described so effectively. I am sharing it with all my kids and grandkids. I wish that when I was in my 20’s someone would have explained to me the difference between investment and insurance. Well done!

  45. i have a child plan icici smart kid rp . from 2007 mar i pay regularly by ecs rs 1000 a month. total invested around 60000. after 5 years fund value almost same 60000. what should i do now in april 2012. thanks

  46. Most of people not going for term insurance because in term plan there is no maturity of there money . People think its a waste of money with no returns
    plase give me suggestion for that because i m an insurance agent.

  47. Dear Hemant.

    Your Article about Insurance is too Understandable , really i am gaining good knowledge. Thank you so much.

  48. Dear Hemant Ji,
    It is very nice to note your constant help to mislead middle class salaried professionals. You have truly demonstrated that candle does not lose anything when it light another candle. Kindly help me to take a correct decision on following:
    I have two Endowment plans from Max Newyork life. Purchased in Year 2003 and after reading your article (How to Exit Mis-sold Insurance policies)
    I wish to surrender these plans, kindly advice whether my understanding is correct and in line with your guidance.
    1. Myself (44 years) – Max New York Life – Whole Life till 100 years – Purchased in May 2003 – Premium paid 9 years – Rs 31500×9 + 20000×7 (OPPB) –Total Paid Rs 423500, Life Cover 10 Lacs – Increasing every year and now approx. 15 Lacs + (PA-5 Lacs, Critical Illness- 5 Lacs)- Surrender Value today – Rs 258976, premium to be paid next 50 years. Next due date is May 30th .
    2. My Son (17 Years) – Max New York Life – Endowment till age 60 years – Purchased in May 2003 – Premium paid 9 years – 15000×9 – Total Paid Rs 135000 – Life Cover 7.5 Lacs – Increasing and now approx. 8.75 Lacs – Surrender Value today – Rs 73500, premium to be paid next 50 years. Next due date is May 30th
    Kindly give your valuable inputs & please advice what to do? Can I surrender these policies..
    Best Regards,
    Rahul Pareek

    • Dear Rahul,

      For surrendering these policies check the value from the company. Since they are traditional plans you cannot expect more than 5-6 % returns .

  49. hie hemant,
    ur E-course s v. useful , nw am tking interst in it & understandin value of money..keep writing>>:) aacha i wnt 2 knw sumting, i hv tkn jeevan saral LIC SIP plan wh. i stated last year ,am quarterly paying rs.18,375/- with accidental insurance coverd. jst wnt 2 knw did i tk a right plan or nt? am also luking for mediclaim wt confused wh. 1 s best? plz guide me.
    Thanx & Regards,
    Veena S. Jeswani

    • Hi Veena,
      Jeevan saral is a traditional policy & you can’t expect more than 6% returns.
      For mediclaim check Apollo Munich.

  50. SIR,

  51. Dear Hemanth,

    Am 32 yrs old and earning 20k per month, i never invested in any of MF or Insurance so far. now i want to invest 2k per month, Pls suggest me should i go for MF or Insurance?, my wife is also works in public sector firm and have no children or dependents…


    • Hi Salil,
      Buy term plan for you asap – that’s the best plan for your kid’s financial security.

  52. Thank You Hemant Sir,
    This article was really helpful in understanding the difference between Investment and Insurance.

  53. Hi Hemant,

    Request you to explain a bit on how to have a simpler Life Insurance when you say “We all must buy a simple insurance even before we start thinking of investing for future.”, since I’m just 25 and have Term and Accident policy separately. Always believed Insurance is an expense and not an Investment. Would like to start with a Positive note!

    • Hi Ganesh,

      You have made a good start by buying the term insurance, which is the simplest form of life insurance you can avail. Enhance it as you progress in your life and add on responsibilities/liabilities.

  54. There is no doubt that “Insurance is an expense and not an Investment”. The fact is that an average Indian is not able to bifurcate between Insurance & Investment (Thanks to 50 yrs of LIC’s marketing Techniques). Investment help us in our future living, where as the insurance help our loved ones, in our absence, for their survival. In its pure form, INSURANCE is similar to our PARENTS, no ALTERNATIVES for both. Friends, Relatives or Well wishers can’t help, the way Insurance Companies do. So every earning member should go for an ADEQUATE/ AFFORDABLE/ CHEAPEST insurance cover for the protection of one’s dependents. And this is the most lovable GIFT to his family.

    • Mohit,

      A term plan is a risk cover in case of death of the policy holder .This means if policy holder dies during the term then the policy SA is paid to the nominee.There is no return from the product and so they are the cheapest to buy a high life insurance coverage.

      ULIPs on other hand are investment cum insurance product where the premium you pay is invested in equity or debt combination as per your choice after deducting the charges, including the life insurance coverage.The returns here are market related.

  55. I and my wife have taken IDBI federal incomesurance endowment and money back plan for our daughter who is 1 year old. We pay annual premium of 52845 and have done so for last 3 years. Is it a good plan to continue with this policy or should we withdraw?

    • Asim,

      Money Back Plans are the costliest plans and so generate the lowest returns.Endowment on other side are not able to beat inflation in most cases. The reason is the higher charges associated with these products which includes the very high commission.

      Hence, you need to analyse your requirement with the product and then take a decision.

  56. Hemantji,
    No doubt what you say is right. large no of average income Indians don’t understand or even understand the difference between Investment & insurance. I met so many people , discussed with them and I found that their basic need is a regular income through out life, but they can’t spare money from their day to day needs. Everyone knows saving is must, so they keep their money with trust to Post office / LIC of India’s conventional plan with insurance & average returns / Bank / PPF ,etc. Since there is no returns from Term Assurance they prefer same amount to put from where they get returns.

  57. Hello Sir,

    What are your views on LIC Jeevan Saral? Can you tell me the difference between yield and rate of interest? I want to invest some money (1000 Rs. in a month)

    Thank & Regards,

    • Brij,

      Its a traditional plan and so not much different from other LIC products. What you need to consider is the net return from the policy.Unfortunately traditional insurance plans are not able to generate more than inflation which is a big drawback.

      Yield is the net returns you earn from the product after subtracting all the applicable charges.

  58. I (age-36,nonsmoker)have tried to get an online term plan from a private company which offers an insurance in a lower cost of yearly premium and it is nowadays the most advertised policy in different sites.But I have had a very bad experience in getting it. I, as a nonsmoker applied for Rupees Fifty Lakh but it required a medical test for which I had to travel a long distance and after a long process of two months they told me that I have given false data regarding smoking and they showed that I have heart problems and by showing all these they have incraesed the yearly premium amount almost four times and counter offered to purchase the policy.I declined as I know very well that I never smoked and I don’t have any heart anomalies as I had already gone through a complete health check up from a five star kolkata based hospital and it showed not a single anomalies in my health.This private policy givers generally take the help of bad even worst medical agencies to test the healths of the customers.After a long argumentations throughout four months the assigned company returned the premium money. This is absolutely a case of cheating the customers who generally don’t have the idea and opportunity to know the reality.This is athe traumatic experience I got and I am really frustrated now to go to any private company anymore.

  59. All,

    I was being approached by Citibank to go for Birla Life Insurance Wealth Secure Plan ( ULIP ).

    I have read quite a lot of information on net regarding this plan and ULIP in general and i get an inclination that ULIPs are not the right product due to heavy charges.

    I was thinking to go for Long Term (5-7 years). In this plan the premium paying is till 5 years and policy is whole life.

    Premium Monthly : 5000 pm
    Sum Assured : 13 lac.

    I have opted for the CREATOR fund in Self Managed Option.

    It would be great if you can provide some pointers to me.

    • Dear Rohit,

      Since the policy is whole life it will be up to you when you withdraw. Since its a ULIP product you will have to manage it.The only drawback is that you do not have option like MF to create a portfolio. So it will run like an SIP in an equity scheme.

      If you wish to continue for long then you should track the fund performance closely.

  60. Hemantji, I agree with you about first Insurance means TERM ASSURANCE., Please clarify about …. I consider that having a long term LIC policy with return, but not ULIP are leading us with a habit of paying regular premium with an ending with sure average appreciation. How many peoples with their own or even some makes financial planner for them and they act on very religiously follow and achive their goals.
    Please advise Endowment plan with term assurance is it ok. same time other options to follow.

    • Dear Vinod,

      You need to look any product in allignment with your goal achievement. Does the net result helping you to achieve your goal?. If not, then even if you are paying regularly, the option is not worth investing for you. So if an endowment plan leads to only 4-5% return and inflation is 6-7%, will it benefit you. Wont a simple product like PPF a much viable option. Think and then decide.

      The other options for long term investment are PPF and Mutual Funds.

  61. hi sir
    the artical is really an eye opner. but i am an insurance manager in reputed mnc n being confused after reading ur artical. am i doing right work. i want to ask that u mean except term plan all insurance policies are useless. one more thing that as u said in previous articals that the best investment beats inflation for that we have ulips which gives better result in long term.kindly give ur guidlince on insurance what to be sold and what not be sold.

    • Hi Varun,
      I would not like to comment on your points as this is about your career. Do your independent research & then decide.

  62. I agree 80% with the article, myself being an insurance agent, I have sold term insurance policies, to my clients, even when they were not aware of it. But, see, other plans (with profits) may not be the best or better even, but, they are also not worst for sure, you see nikkei 225, for example, has it reached a point, even 80% close to its peak in last 3 decades, surely you can also expect negative returns in long term from market as well. I know, this is not a benchmark, but, surely an interesting example, may be some individual stocks have outperformed here though.

    This is my opinion.

  63. Sorry, I forgot to add one more point, Please let me know, the plans having 70% commission. I am unaware that such plans exist, in my decade of experience, please shed some light.

    With all due respect sir.

  64. Hi Sir & everyone,
    i want to rise some view of mine about the benefitial of mutual funds over any insurance, i may be wrong but why i rise this is to gain more knowledge from all of you…..
    here it goes…… assuming rate of return as 10% in both,
    1. Life/Term insurance can evade taxes But Equity Mutual funds Do.
    2. Insurance involves many steps of charges, from insurance company to fund houses.
    3. If insurance policy holder’s died completing 10 years premium i.e., 5,00,000 within the term, What will be the amount he get, by assuming the below eg,,
    a. Annual premium = 50,000
    b. term = 25 yrs
    c. sum assured = 1 crore/2 crore
    I dont think the nominee will get sum assured of 1 crore/2 crore coz his envestment is only 5 lacs. Or even if the holder is alive and paid full premium, what will be his sum benefit? I think the actual sum recieve will be base on market rate assuming his total premium not the sum assured. If this is the way they calculate returns then the return will be below the inflation rate,
    EXAMPLE, 1. His actual capital will be less than his actual contribution i.e., agent commision (actual contribution – agent commisionand – Funds houses commision – transaction charges)
    2. Again taxes deduction on net value, Which will finally dump even the sum contributed to below the inflation rate.

    Equity mutual funds is the best coz no income tax deduction, less charges steps and a handsome rate in a long run…

    Please Clearify on this funny views of mine.,,,

    • Popo,

      Firstly tax evasion may not be the right word.What you get is tax exemption.Secondly if policy states that nominee will get SA and bonuses on death of poliy holder then even if it is a crore or two it will be paid to him/her. It is only in ULIPs that it get links to Fund Value.But there also some companies give SA+Fund Value.

  65. sorry ,, clearification on point no.1 of the above post of mine.
    it should be read as
    1. Life/Term insurance “CAN’T” evade taxes But Equity Mutual funds Do.

  66. LIC agents are only after their commission. I was forced to take Jeevan Saral Policy with 12000/- annual premium just to have my home loan passed. The Agent said that if I do not have these type policy then my loan will not be passed. He also sold it to me as an investmnt plan with lots of return. When I said that after paying so much of premium my return is only 6% and that also not guaranteed, and if I invest the same amount in share market with some research and risk appetite I can earn the same amount within 5 yrs. To this he did nat have any answer only thing he cited that without any policy with LIC it will be difficult for me get the loa from LICHFL

  67. If you are still wondering about weather insurance is an expence or investment .You should think about the purpose of insurance .The aim is to have a backup for the unforeseen ,this means something you can use when the other fail .therefore it depends on the purpose for which you are acquiring the insurance .Insurance is not a gamble ,and should have solid agreement between both parties that are involve to gaurantee the security for the item that is being insured. There are also different modes of insurance ,short term coverage and long term insurance.for short term insurance is an investment untill the end of the term .after that can be termed as an expences if is not utilized ,the same goes to long term .Any expense which gives a foothold and act as a security towards unforeseen circumstances, is an investment.

  68. Hi Mr Hemant
    You are doing a great job educating others about financial plans. Thank you.
    I have a question about ICICI GSIP plan. I appreciate why you advise to opt for term insurance policies. But please advise on this GSIP if possible.

    The ICICI salesperson says to me that the return is generally around 10%(IRR) at the end of 20 yrs if I invest Rs 2 Lakhs per annum for 10 years. He said the amt is invested into G-Sec Bonds and they get better rates because they lend huge amounts to the govt.
    I havent come across anything which offers as good as 10% annualised return (apart from MFs)

    Please advise. Thank you.

    • Dear Mr.Suresh,

      Even I have not come across bonds which offer 10% returns. Most agents lack knowledge in understanding the debt investments and so you are being offered high return which will not be achievable.

      Your unconvincing statement about returns is a good enough reason to avoid the product.

  69. Hi Hemanth,

    You are doing a great work.This is not less than any coaching institute.

    Ramesh T

  70. I have read many blogs, but I’m not getting any, to help make a decsion. Can someone help.

    I’m 36y old and an NRI. I want to buy a term plan for Rs.90 L. Is it advisable to buy from two different Insurance companies each worth Rs. 45 L or one Insurance company worth Rs.90 L.

  71. Hi Hemant,
    Kindly advise me regarding HDFC SAP and LIC Policy. I am confused after reading your articles. Should I keep paying for these two policies or should I stop paying.
    Waiting for your reply.

    1.HDFC Saving Assurance Policy (Jan,2010 ),24000 annual
    2.HDFC Sampoorn Samridhi (Aug,2011) 25000 annual
    3.LIC Jeevan Saral (June,2009) 36000 annual
    1. LIC Market Plus-1 (Sept, 2009) 20000 once
    2. Axis Triple Adv Growth (4000 units)
    3.Axis Hybrid fund series 1 Growth (3000 units)
    SIP ICICI focus Bluchip equity Fund Growth (1000 monthly)

  72. Term plan + PPF
    Term plan+ Any debt fund

    will give far better returns (and safe bet too) than any of the plans which sell to the emotional psyche of people..

  73. Hi,

    I’m looking for tax saving options (already meet the requirement under 80C). One advice I was given is to consider ICICI Elite Life as an option – the claim is 100% of the returns are tax free under 10(10d). Additionally, the investment is done in debt instruments (100%) with the option to move part of the funds to equity monthly to give the benefit of interest rates plus SIP in equity.

    Charges are supposed to be same as mutual funds with an additional mortality charge which will get adjusted against the compounded returns earned (lock in period of 5 years). I’ve read your articles that say don’t mix insurance and investment – however, confused about this one as it seems like a good deal.

    Would appreciate any advice you can give me on this.

  74. Hello Hemant,
    I have an LiC policy Jeevan Saral sold to me by an agent who assured me amazing returns.I am paying 3062 per month, its a 25 yr policy.On the policy it says sum assured is 945000 .What sense does this make??Im making 30000 after 25 yrs.
    What can i do now?Its been a year.

  75. Hi Hemant,
    This is my first visit to your blog and found it very educating.
    I am an online tutor by profession and 33 years old. I am planning to take a life insurance since I do not have any at present.
    I am planning to invest 7-8 thousand rupees annually in a term plan for a risk cover of Rs 30-40 lac. Along with that I want to invest around Rs. 15000 annually in some way other than insurance to get good returns.
    Could you please suggest me the plan/ firm on these two points.


  76. Hi Hemant,

    i do agree with you that Insuarnce and investment should not mixed it , 1st policy we buy should be term insuarnce which is a pure insuarnce ,since we have very less good /safe investment option we intent to buy insuarnce as investment . I am consider insuarnce as liabillity instead of assets , i pay my premium assuming i am paying of my housing loan EMI , once all my EMI/premium pay off that time my liablity will convert to assets .

    Your comment that agent disappeared after 1st premium , i do not agreed , there are good agenet in the market who provide good service, advice as per customer requirement .

  77. Sir, Thanks for the million dollar info. I have been working as an insurance agent with LIC since 1999 with code no 161/4007. Sir, our Financial planners advise country men to have a pure term plan as a must-have in their kitty. But most Indians, in fact, Educated Indians too, want a return from insurance- that’s what I have seen in the last 15 years. Sir, the lapse ratio of LIC’s first Temporary Term Insurance Bima Kiran Table No 111 is more than 25%- therefore, it will take some time for our country men to get inclined towards Pure Term Plans. Moreover, Sir, India is a country where the Dowry system is still prevalent and perhaps, growing- therefore the return component is something everybody looks for. But yes, Term plans are being sold at a larger rate now- with 1 Term plan sold every 5 minutes-that’s encouraging. Some insurers have come up with new ideas about Term plans keeping in mind the Indian mindset- 110% return of premiums on maturity of Term Plans. You can take Indians out of India but not India out of Indians perhaps- so I try to sell policies that have a Auto-cover or Claim concession facility . Thanks to your efforts- at least people are learning about the necessity of insurance- life, non life or health. LIC agents should be hailed for making India 23 % insurance conscious . Sir, LIC has 30 crore policies in its kitty- if we take for granted that 1 individual has at least 2 policies that would mean 15 crore policy holders. Let’s assume Pvt insurers have 2 crore individual policy holders- the total adds up to 17 crores out of 60 crore insurable population- mere 28% . Therefore Sir, to woo prospects into the realm of insurance,life or health, insurers are compelled to design products with a return component. The educated class is slowly turning to Term plans but given that financial literacy in our country is below 15 percent, people will go for products other than Term insurance. I feel financial literacy in academics is important to bring out the insurance mood. Anyways, thanks for the exciting post. Hope to hear more like this.

  78. Dear Hemantji,
    Sir, the average Indian is not insurance conscious. Life insurance does not figure in one’s must possess list or wish-list. People feel that they should get adequately insured but again, feel that a premium of Rs 20000 for a life cover of 1 crore for a 30 yr term would mean to them Rs 600000 lost in vain- therefore, to suggest the average Indian a Term Plan would actually amount to no insurance sold . My father was on the verge of taking a Term plan from Ageon Religare but changed his decision in the nth hour and got lured to an Endowment policy from LIC. His logic is that life insurance is based on two facts- 1. Living too short. 2. Living too long. If he outlived his utility years, the premium he would pay for a Term policy would just be a waste of money- moreover, he is of the view that beyond 60 years he would not be able to pay the premium for a term plan given the rising medical costs. The Aegon Relogare insurance adviser wanted him to buy a health product also- but since there is no return- my father put the proposal aside. Sir, selling insurance is extremely difficult in India- on one side you want your money to multiply , on the other you want to have a cover for your loved ones as well- I think insurance companies need to design their products according to the needs of Indians and Life and health insurance should me made mandatory in India. Sir, why is it that Life and Health insurance unlike Vehicle insurance are not made mandatory ?

  79. Sir, Your comment that LIC has done everything but has never done well to insure people is controversial and misleading. LIC is the most trusted brand in the country and millions have benefited from LIC. Sir, I often read in your blogs that we, LIC agents miss-sell products- Sir, it is impossible to judge what product would best suit Tom/Dick or Harry. You have been advising readers to buy Term plans as these provide life cover at the cheapest possible rate- good. But Sir, one needs to have a Health cover of at least 5 times his annual salary in addition to a life cover. I understand, I am not educated enough. But without insurance agents, the insurance sector in India will suffer a great blow. If astrology was a sure shot, then, there would be no insurer. I have seen you advising people to stay away from products like Jeevan Ankur, Jeevan Anand etc. But on the contrary, these products are sold in large numbers. India is a country where ‘zero’ was invented. These people are not that foolish as you may think of them. Recently, one man in Gujrat purchased a J Anand plan of 36 lakhs and paid an annual premium of above 3 lakhs. Is he insane? If he can pay that premium, he must earn at least 1 crore or more than that. Indian insurance market is too nascent now- not ready for the theory Min- Max- minimise your premium or perhaps pay no premium at all and have insurance of 20 crores. IRDA came into existence in 2000 and the first thing they had to offer were Ulips- which either clicked for Mr X or did not click for Mr Y. IRDA is responsible for the unethical selling of Ulips and not agents alone. Then came the theory of Term plans and our Financial planners now had the most awaited opportunity to land a kick on the stomachs of insurance agents. But let me ask you Sir, there was a low interest regime in India, when we got to hear that Banks’ now will charge the security money on your Savings account and banking industry in India will undergo a sea of change. But subsequently, bank interest rates were hiked and this perhaps, stupefied the insurance industry.With the BSE SENSEX rising up now- almost 27000 points, the bank interest rates are not falling down- why? Is not this not a contradiction to established laws of economics? When LIC came up with Jeevan Astha, nothing was written against this product- why? Because this was the best in the market then….when the markets were abysmally low…. I am an avid fan of Hemantji and would like to assert that IRDA had almost destroyed the indian life insurance sector by cramming it with Ulips, which were once the talk of the town- we, insurance agents worked tirelessly to make things favorable once again – Indian insurance mood is still Insurance linked savings and one should leave it that way. There are a lot of factors that hinder insurers from declaring higher bonuses ,for instance ,the solvency margin- reason why insurance linked savings products are not able to generate returns good enough to beat the rising inflation rate in near future. But to educate people on Term insurance is one thing and to educate people on necessity of insurance is another. I feel you are trying to educate your readers about Term insurance and not about insurance- be it life , non-life or health. You are of the view that we, LIC agents take away peoples’ money with fake promises and they would generate handsome amounts if they invested in SIPs, PPFs or MFs. Sir, in our area State Bank of India is sole authority to sell PPFs. When I went to the Bank Manger and asked about PPFs, he was quick to answer- Invest if you want, don’t ask me questions- I don’t know much about this. Invest if you like- read the document but don’t bother me please……Sir,I think I do far more a handsome work…… I do not let my clients down…… Hope you begin to look at things from a different angle Sir…..

  80. Dear Sir,
    Recently one insurer ( X) has launched a e-term policy ( named – DO NOT PAY PREMIUM AT ALL) FOR LIFE COVER 60 CRORES …. Great news is not it Hemantji…..ZERO PREMIUM AND LIFE COVER 60 CRORES ……Now every reader of this blog can be advised to park their HARD EARNED MONEY in MFs PPFs SIPs……

  81. Dear Sir,
    My motor cycle is insured for Rs 35000 ( fourth year insurance) against premium of Rs 755 inclusive of service tax. For a life cover of 1 crore from Aegon religare for 30 years term one needs to pay roughly Rs 22000. My question – Is the value of human life so mean? Compared to GIC premium , life insurance premiums are very low and the coverage very very high. I think GIC is taking away too much premiums and you must write something against them….and the premiums they charge…

    • Hi Sivam,

      I am not sure if its your real name. You are working for “insure magic” & trying to confuse people. Why??




  83. I Bought LIC child fortune ULIP polciy (Premeium 25K per Year & 9 Lack Life coveage).I paid 5 preiums,Due to apprciation in fund value i started investing appriciated amount and invested amount as a premium .Still i am having life coverage as well as appreciation in fund value.In what way u say it is not good to invest in ULIP.

  84. good morning, relay it is so effective article for every indian people who is not aware from this difference

  85. I am 100% agree about we don’t see agents after first premium. They make heavy commission by selling the product. Because of them we laps our Primmum.

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