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The Simple Dollar reviews The Total Money Makeover and even though these are US figures it applies much the same to India. Here’s an excerpt (a point I keep harping upon):
All of the [extra payments beyond the price of term insurance] per month disappears in commissions and expenses for the first three years;
after that, the return will average 2.6 percent per year for Whole Life, 4.2 percent for Universal Life, and 7.4 percent for the new-and-improved Variable Life policy that includes mutual funds.
These statistics are from Consumer Reports, Consumer Federation of America, Kiplinger’s Personal Finance, and Fortune magazine, so these are the real numbers.
Additionally, a recent article in National Underwriter, The Industry Mouthpiece, showed charts of returns from fourteen national companies. The returns they show average only 6.29 percent over twenty years. [...] Worse yet, with Whole Life and Universal Life, the savings you finally build up after being ripped off for years don’t go to your family upon your death; the only benefit paid to your family is the face value of a policy [...].
The truth is that you would be better off to get the [inexpensive] term policy and put the [extra payments beyond the price of term insurance] in a cookie jar!
That pretty much sums it up. If you want insurance, buy bread-and-butter term life insurance. If you want an investment, buy an investment from a brokerage with low-cost investments . Mix the two and you’ll find yourself eaten alive by fees and commissions.
I edit Personal Finance Online Resources, deliver Financial Awareness Workshops and have built a desktop RupeeManager.
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Hi
In my opinion insurance is not an investment, its the protection for your not earning days and return isalso very minimamum in terms of ruppee but too much in terms of social protection.
Khalid
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