Life Insurance Plans and Term Insurance Benefits: A Practical Buyer’s Guide

My cousin Amit called me at 11 PM last Tuesday. His voice was shaking. His colleague, a 35-year-old father of two, had died in a car accident. The family had no insurance. Now his wife was figuring out how to pay the home loan and kids’ school fees.

This isn’t a rare story. It happens every single day across India.

Everyone knows they need insurance. But when I ask people what kind they have, most look confused. Life insurance, term insurance, and endowment plans. The names alone make people’s heads spin.

Let me clear this up for you. I’ll explain it the way I wish someone had explained it to me.

What Are Life Insurance Plans Really?

Life insurance is simple at its core. You pay money regularly. If something happens to you, your family gets a large sum of money. That’s it.

But companies have created so many types of life insurance plans that people get lost.

Some plans just give money to your family if you die. Some plans also work like savings accounts. Some promise to pay you back with profits. Others invest your money in the stock market.

The confusion starts here. People think all life insurance plans are the same. They’re not even close.

Breaking Down Term Insurance Benefits

Term insurance is the purest form of life insurance. No frills. No extras. Just protection.

Here’s how it works in plain language:

You buy a policy for 20 or 30 years. You pay a fixed amount every year. If you die during these years, your family gets the full sum assured. If you survive the term, the policy simply ends. You don’t get any money back.

I know what you’re thinking. “What? I pay for 30 years and get nothing back if I’m alive? That’s a waste!”

Hold that thought. We’ll come back to it.

Massive Coverage at Low Cost

For 10,000 rupees a year, a 30-year-old can get 1 crore coverage. Try getting that much coverage from other life insurance plans. You’ll pay 5-10 times more.

Your Family Stays Secure

If you’re the only earning member, term insurance makes sure your family doesn’t struggle financially after you’re gone. They can pay off loans, handle daily expenses, and maintain their lifestyle.

Simple to Understand

There are no complicated investment calculations. No maturity benefits to track. You know exactly what you’re getting.

Tax Savings Too

The premiums you pay get a tax deduction under Section 80C. Your family doesn’t pay tax on the death benefit either.

These are the biggest term insurance benefits.

Different Types of Life Insurance Plans

Now let’s talk about other life insurance plans available in the market.

Endowment Plans

These are the most common plans agents sell. You pay premiums for 15-20 years. If you die during this time, your family gets the sum assured. If you survive, you get your money back with a bonus.

Sounds great, right? But here’s the catch. The returns are usually very low. Around 4-6% per year. You can get better returns from a simple fixed deposit.

Money Back Plans

Similar to endowment plans, but they pay you some money at regular intervals. Maybe 20% after 5 years, another 20% after 10 years, and so on. If you die, your family still gets the full sum assured.

The problem? Premiums are high, and returns are still poor.

ULIPs (Unit Linked Insurance Plans)

These plans mix insurance with stock market investments. Part of your premium buys insurance. The rest gets invested in mutual funds.

ULIPs can give good returns if markets do well. But they come with high charges in initial years. Plus, you need to understand where your money is being invested.

Whole Life Insurance

These policies cover you for your entire life, not just a fixed term. Premiums are much higher than term insurance. They work better for estate planning if you’re wealthy.

Why Term Insurance Benefits Win for Most People

I’ve studied insurance for years now. I’ve talked to financial planners, insurance agents, and real families dealing with claims.

For 90% of people, term insurance is the smartest choice. Let me explain why.

Protection is the Real Goal

Insurance should protect your family’s financial future. That’s the primary job. Term insurance does this job best because it gives maximum coverage at minimum cost.

Don’t Mix Insurance and Investment

My financial advisor always says this. Insurance and investment are two different needs. Handle them separately.

Use term insurance for protection. Use mutual funds, PPF, or fixed deposits for savings. You’ll end up with more money and better coverage.

Real Math

Let’s say you’re 30 years old and want 1 crore coverage.

Term insurance costs you around 12,000 per year. Other life insurance plans might cost 80,000 to 1 lakh per year for the same coverage.

That’s a difference of 68,000 to 88,000 rupees every year. Invest that extra money in a decent mutual fund for 20 years. You’ll build a much larger corpus than any endowment plan can provide.

Claim Settlement – The Real Test

Everything looks good on paper. But what happens when your family actually needs the money?

Before buying any policy, check the company’s claim settlement ratio. This shows the percentage of claims they pay.

Anything above 95% is good. Above 98% is excellent.

Read online reviews from people who’ve actually made claims. Their experiences tell you more than any brochure will.

Taking the First Step

Sit down this weekend. Calculate how much coverage you need. Get quotes from 3-4 companies online. Compare the claim settlement ratios. Pick the best one. The whole process takes maybe 2-3 hours.

My neighbor who lost his colleague? He bought a 1 crore term policy the very next week. He’s sleeping better now. His wife is relieved.

You can either learn from other people’s pain or wait for your own wake-up call.