Why you should stick to a term plan
Last Update Date: 05-10-2026
Published by Morningstar India
Abhishek Kumar's role: Wrote this article
Abhishek Kumar wrote the analysis in this guest piece, comparing a traditional insurance-cum-income plan with a term plan plus separate debt investment for a 25-year-old.
What Abhishek Kumar said
Is an insurance-cum-income plan a good way to combine life cover with savings?
I would keep the two apart. In the case I looked at, a traditional non-linked, non-participating plan asked for a large annual premium for twelve years and later paid it back as a modest yearly income, with the life cover ending once the premium-paying years were over. When I worked out what that payout implied as a growth rate, it was lower than what a plain debt instrument offered at the time. A term plan for the protection and a separate investment for the savings looked more sensible to me.
How long should my term cover run?
I suggest holding term cover through the working years, roughly until planned retirement, rather than for a short policy term. In the example I used, the bundled plan's cover stopped when the policyholder turned 37, right when family responsibilities tend to be heaviest. A term plan taken till about 65 cost a small fraction of the bundled premium, which left most of the money free to be invested separately in debt or equity, depending on the person's risk appetite.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on insurance
A short Morningstar India piece on separating insurance from investment. It works through the case of a 25-year-old weighing a 12-year non-linked, non-participating life insurance cum income plan, and compares it with buying term cover to age 65 and putting the premium difference into debt.
Publisher source
Why you should stick to a term plan