The Plainspeak / Insurance

A belief · pairs with the Endowment tool

"Guaranteed" is the most expensive word in Indian finance

A product built to do two jobs does neither one well.

By 37xBetter · a banker's view

Someone you trusted sold you the plan. A relative, a bank officer, the agent who comes every Diwali. It promised to do two things at once: protect your family and grow your money. One premium, both boxes ticked. It felt like the responsible thing to do.

Here is the problem. A product built to do two jobs does neither one well.

The protection is thin: a few lakh of cover for a premium that would have bought you a crore as pure term insurance. And the investment inside it, once you run it honestly through an IRR, usually lands somewhere between 4 and 6%. You have locked decades of your money into a return that often fails to keep up with inflation, and you did it because of one word printed on the brochure.

The fix is to stop asking one product to do two jobs. Buy a pure term plan for protection; it is startlingly cheap precisely because it does only one thing. Then take the premium you were overpaying and put it where it can actually compound: an index fund, PPF, whatever fits you.

It works because insurance priced as insurance is cheap, an investment freed from a 5% wrapper grows at market rates, and once the two are separate you can change either one without disturbing the other.

In nineteen years inside a bank I have sat across from people holding three of these at once, each one sold as safety. If you are one of them, you have not ruined anything. Run the policy through the calculator first. A plan twelve years in is sometimes worth carrying to maturity, and sometimes the surrender value plus redirected premiums still wins. Let the number decide, not the guilt.

"Guaranteed" tells you the return is certain. It does not tell you the return is good.