Read an amazing article on 10 March in a national pink daily on Term Insurance with Return of Premium. ROP as it is called.

The author had argued that a Term ROP should not be bought because it is more expensive than the pure Term insurance and hence it should not be bought.

This is wrong. Completely wrong argument. Conclusion is right!! LOL

When you take a term insurance you take for a risk cover. Say you are 34 years of age and have taken a term insurance for 30 years (till your age of 64)….for Rs. 1 crore. Your wife is not working – she is looking after 2 babies…so you need this cover of Rs. 1 crore….just in case.

Fast forward to 15 years later. You had a fantastic career run, you encashed your EsOPs. Your properties did well, and your dad left you a fantastic portfolio and a nice house. Your net worth is now Rs. 14 crores, you are in business and your wife is working too.

Your kids are doing well in life – and you think they will do great in their career too.

Of what use is the Rs. 1 crore sum assured through a term insurance? zilch.

So you need to THROW IT AWAY. Now.

You can throw away a term insurance plan PROVIDED it has not developed some kinda ‘surrender’ value…however that is not worth the trouble…!!

Oh la la la…..your TERM ROP money is lost. Gone forever.

Also you took a Rs. 1 crore policy from company A in 2010 and the premium was Rs. 6783 for one year.

Exactly after one year you find that for your age company E is offering Rs. 1 crore sum assured for Rs. 6343….

SO YOU THROW AWAY THE POLICY FROM CO. A….and buy a new one from company E. Simple.

So you take a PURE TERM PLAN so that you can have full flexibility.

sorry Business standard – had to do this!


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  1. Bang on Target, Subra Sir.

    The flexibility pure term plans offer in terms of switching, lower premiums due to competition kicking in or due to technological advances (online term plans instead of regular agent based insurance)cannot be matched by anything else. Further, as you have rightly pointed out, if God has been kind to you, the Sum Assured that looks like ample right now might not amount to anything in your overall wealth portfolio at later stages of life. So it’s better to junk the plan totally and invest the amount somewhere else.

    Another way you can still minimize the insurance expense is through laddering. It might not be known to many that contrary to endowment plans/Ulips etc, a term plan becomes costlier as the duration increases. For, say, a 35 year old male, premium for 40 year term plan will be more than a 30 year plan for same Sum Assured. What you can do here is to Stagger the plans as per your needs. In my case, for example, I have taken one term plan of 10 year duration to cover Kid’s education expense, one of 15 year duration to cover their marriages and one of 30 years to cover life expectancy. The total premium outgo is much lower than a single policy of 30 year duration. Now if I were to die today, the total SA will be available to my family. If it happens after 10 years, my kids education would have been completed by that time and there will not be any need to cover those expense. So I don’t need to have that cover at that stage. Ditto for marriage. Of course, you need to keep a few things in mind to do so, the first and foremost being filling the insurance form yourself and providing details of your existing policies there.

  2. My father purchased an agriculture land in 1995 worth Rs. 28,000/- with his partner. They sold it in 2013 for Rs. 13,00,000/- . since the holding was equal, each will get Rs. 6,50,000/- . How much tax to be paid.?

  3. Sir,

    still i am unable to trust on Term insurance policy. In case of any casualty will really these company give claim to the nominee without any hassle.
    Because the insurer is not there only nominee is there to claim. In what conditions claim can be rejected . And what should nominee do to take hassle free claim


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