Term plan is one of the cheapest forms of life cover. But one drawback is that the premiums paid towards this plan are completely written off if no eventuality occurs during the tenure of the plan.

However to compensate the amount that you pay for this plan, you can take this plan in combination with another insurance plan. The main reason for doing this would be that you could get covered for a higher amount under the term plan. In this case, the premium is cheap and you can get the premiums compensated under another plan in the form of bonuses. Here we are not considering the time value of money. We are only trying to reduce your net outflow.

We have illustrated this with one combination:
Term Plan with Endowment Plan
As we have already mentioned, you can take higher cover under the term plan and take a small cover under endowment plan.
Given below is an example of a 30-year male for a 20-year tenure.

Plan	Tenure Years	Cover (Rs)	Annual Premium (Rs)	Total Outflow (Rs)	Maturity (Rs)	Bonus (Rs)
Term	20	1,900,000	5,413	108,260	Nil	Nil
Endowment	20	100,000	4,835	96,700	100,000	130,000
Total		2,000,000	10,248	204,960	100,000	130,000

* bonus is taken on an assumption of 6.5%,which is not confirmed by any insurance company.

In the above table, the total outflow is Rs 204,960 whereas the inflow is Rs 230,000 thus providing you a total cover of Rs 2 million. If there is death during this tenure (over 20 years) your family will receive 2 million plus bonuses till that year.

On survival of the tenure you still receive the sum assured and bonuses. So you recover the premiums paid towards the term plan by way of bonuses on your endowment plan.

To know more about how insurance can be used as a financial planning tool and how it can be designed to take care of most of the eventualities of life, please register here.

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