The standard response of Mint Money to an endowment, or money-back insurance, plan is ‘no’. There are three major reasons we recommend that our readers avoid traditional insurance cum investment plans. First, of course, is the complexity of the product. Pick up the brochure of any bundled insurance policy and read it. You are likely to have more questions than answers. Second, the returns from these plans are low in the range of 0.5-6%. Given these are long-term products, we don’t recommend them as they can generate negative real rate of return (investment rate minus the inflation rate). And third, of course, is the premature surrender penalty, which hurts the most. This is the money you forfeit when you stop funding the policy prematurely.
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