Yes, you do need insurance but only Term insurance. Period!!
Endowment policies are good for nothing. They are not going to benefit you whatsoever. What are the advantages these endowment policies have to offer? Hardly any!! Buts let’s do a check. Other than keeping your money stagnated for a long duration of time they typically don’t offer any value. Let’s say your insurance policy asks you to pay $500 yearly for the next 20 years. It promises you a risk cover of $10000. At the end of 20 years it promises you at least $12000 return.
Now you really need to ask yourself this simple question. What good is this policy if you are getting meagre $12000 on your overall investment of $10000 and that too at the end of 20 years? Ok you get a risk cover of $10000. That’s all fine. But this risk cover is only applicable until the duration of the policy.
Consider that the economic inflation rate is 7-8%. If you just invest your hard earned money in Fixed form of deposits or even in assets like gold then you will get better returns in a 20 year horizon. Law of compounding says that if you invest amount x today you will make at least 7 times x in 20 years. By that law if you invest 500 per year you must get around $16000 at the end of 20 years. And I am talking about the most secure form of investment. You take some more risk you would earn far more. The only benefit we are seeing with endowment insurance policies is the risk cover. But then why just not buy a term insurance. Split your $500 into 2 parts. Get a term insurance of $100000. Your premium won’t be more than $250 a year. Now the next part you can diversify and put in a mixture of safe and speculative assets like Gold, stocks or real estate.
Trust me. You will really make the best use of your money and cover all your risks by not investing in endowment policies. So the next time a marketing guy approaches you for selling a policy, you know what to do.
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