Insurance terms in India are different. If you are confused between term life insurance policy vs LIC insurance which is better. The answer is here.
LIC is one of the biggest insurance companies and oldest giant so most people believe in it and most people don’t know beyond LIC but the time has changed. There are many different insurance schemes that are more beneficial than LIC and are also trustworthy. Today we learn about some drawbacks of LIC and advantages of the term Life Insurance. The confusion is clear here: why you should take term life insurance and who should not take it.
Term life insurance policy vs LIC money back policy which is better
Days are gone when everybody used to take the LIC scheme in India. Now most people are aware and taking different beneficial Life Insurance schemes but still some people are in the loop of LIC.
This post is not against lic instead my motive is to educate people about the best term insurance policy may be beyond lic.
There are several term life insurance policies including HDFC term Life insurance SBI term life Insurance etc. Let’s first understand what is the term life insurance and why you should take it.
What is term life insurance and why take it
It is an insurance policy of a person whose family gets a big amount after him/her. Beauty of this policy is it can be started with minimum Rs 500 to Rs 1000 per month and gets a life cover of minimum Rs 35 lakh. It is return of premium term life insurance.
You can avoid agents and take this plan online through the policybazaar.
Best thing about term insurance policy is the premium is very low and returns are very high whereas in LIC premiums are very high and returns are very low. By putting money in term insurance you can save more money and invest it in nifty bees for long term 10, 20 years to get high returns.
People get confused here and have different opinions: If a person who has taken term insurance for 20 years and survives over 20 years then he/she and their family will not get any amount and their investment for 20 years will be collapsed.
Here is a glitch you should understand. This is not an investment plan so don’t think about getting returns instead it is a plan to secure your family.
People often treat it as an investment plan and think that they will get nothing if they survive whereas in LIC they or their family gets a fixed amount in both conditions whether they survive or not.
Don’t treat term insurance as an investment plan. Don’t mix and keep investment plans separate. SIP is the best investment option for all types of people.
In simple words, Term Life Insurance is to cover your family not to earn money from it.
Some companies also offer a non income proof policy in term insurance.
LIC VS Term life insurance
| LIC money back policy insurance | Term Life Insurance |
| 1 year premium = Rs 5500 x 12 months = Rs 66,000. | 1 year premium = Rs 600 x 12 months = Rs 7200. |
| LIC 20 years premium = Rs 7200 x 20 years = Rs 13,20,000. | 20 years premium = Rs 7200 x 20 years = Rs 1,44,000. |
| Very high premiums per month. | Affordable premiums per month. |
| Low returns on high premium. | Handsome returns on low premiums. |
| Get returns even if the policy taker survives. | If a policy taker survives, the family will not get any returns. |
| Covers – Accidental, illness, health. | Covers – Accidental. |
| For health you have to take another insurance that is also cheaper and cost around Rs 600/month. | |
| There is hardly any term life insurance for senior citizens. |
You can take joint term life insurance as well. Aditya birla term life, Bandhan and Tata aia term life insurance is decent for small salary holders and non income persons. It is good to choose term life insurance with critical illness rider so choose wisely and analyze different company policies.
Bandhan is low cost term life insurance and you can start with minimum Rs 500 to Rs 600/month.
From where to take term life insurance
Policy Bazar is a trusted hub of different policy companies where around 25 companies are listed. You can visit their site online and pick the company of your choice, you can take the help of customer support as well. Unfortunately there is no term life insurance for senior citizens.
If you are 40 years to 50 years then hurry up and must take insurance for health and life. Inexpensive term life insurance for seniors around 50 years starts from around Rs 750/month. Before taking any policy must analyze life insurance terms and conditions.
Term life insurance vs lic premium for 20 years
Let’s understand how much money or premium you put in a basic term life insurance plan for 20 years, how much cover income your family gets and how much money you put in LIC for 20 years and how much your family gets.
You can take term life insurance Kotak, sbi or Bajaj insurance or any term life insurance it’s up to you. Due to the very low premium starting from only Rs 500 to Rs 600 a college student can also start term life insurance in their early days.
Suppose you started the term life insurance of Rs 600/month at the age of 40 years then you will have to pay around Rs 1,44,000 in 20 years. See the calculation below:
- 1 year premium = Rs 600 x 12 months = Rs 7200.
- 20 years premium = Rs 7200 x 20 years = Rs 1,44,000.
If you secure your family for 20 years by paying only Rs 1,44,000 in 20 years and your family will receive Rs 35 lakh then this is a good deal because 35 lakh will matter after 20 years also. You will not feel the burden of putting only Rs 600 per month.
If you start the insurance of Rs 600/month then you have to pay only Rs 1,44,000 and after you your family will get Rs 35 lakh.
Non income proof policy
This is the lowest income policy. It is a non income proof policy for those people who don’t have a fixed income in their bank. The drawback is only those are eligible who can maintain Rs 2 lakh per year in their bank account. What about those who can’t and why it is considered a non income proof policy!
If you are earning a decent salary you can try sbi term life insurance 1 crore. In this your family will get Rs 1 crore after you.
If you survive your family will not get anything after 20 years
Most people think that if they survive their family will not get anything and their investment will be wasted. They should calculate how much they are investing and first of all it is not an investment return plan so don’t mix investment plan and insurance policy.
LIC gives around Rs 18 lakh after 20 years your survival as well
Yes it is true LIC gives Rs 18 lakh after 20 years whether you survive or not. The advantage is if a policy taker survives then also he/she gets this amount after 20 years. For receiving Rs 18 lakh you have to pay a high premium of Rs 5500/month see the calculation below how much money you put in 20 years. It is a type of money back term life insurance.
- 1 year premium = Rs 5500 x 12 months = Rs 66,000.
- LIC 20 years premium = Rs 7200 x 20 years = Rs 13,20,000.
In non income term insurance policy you are submitting only Rs 1,44,000 in 20 years and your family getting insurance cover of minimum Rs 35 lakh. Whereas in LIC you’re submitting Rs 13,20,000 in 20 years and your family will get around Rs 18 lakh after 20 years.
While subtracting Rs 1,44,000 from Rs 13,20,000 = Rs 11,76,000 is the amount that you pay more in lic and saves in term insurance policy. You can invest this amount Rs 11,76,000 in SIPs and generate more than LIC in less time.
Don’t worry you don’t have to arrange all money together in SIP you can create a per month submission as per your pocket size. SIP can be started from Rs 500 per month as well.
So be a wise investor and put term insurance policy ahead of any other high premium submitting policies. Don’t expect returns in insurance policy instead invest the money in nifty bees for high returns that you save not putting in high premium policies.
If you are a millionaire then there is no need to take the term insurance policy.
Remember insurance policy is different and investment plan is different don’t merge them otherwise companies will fool you.
Conclusion – Term life insurance vs lic insurance comparison given hopefully now you know which is better. Why you should take term life insurance, how much money you submit in 20 years in lic and term life insurance is discussed.
