Term vs Traditional Plans: What Should You Choose?

“Most people don’t plan to end up with the wrong insurance. They just signed where someone said, ‘Trust me, this is good for you.’”

❓Term vs Traditional: What To Do With Old Plans

🤔 You Might Relate

If you’ve ever opened an old drawer and found a thick LIC policy bond from 2012 — welcome to the club.

Maybe you:

• Started a traditional plan because your HR said it’ll save tax
• Bought one from a family friend who swore, “This is best for your daughter”
• Paid premiums quietly for years — without really knowing what it covers

Now, you're hearing about term insurance. You're seeing ads. You're wondering: “Did I do something wrong?”
“Should I cancel these old plans?”

Let’s talk. Not like a finance guru. Like someone who’s met hundreds of families in places like Garia, Dunlop, and Serampore — and heard the same quiet questions over tea.

👣 What Actually Happens

Here’s the pattern I’ve seen again and again:

1. People start with a traditional plan (endowment, money-back, etc.)
2. They pay premiums for 5, 7, even 10 years
3. Somewhere along the way, they realise:
   
   • “Wait... is this enough cover?”
   • “Why is the maturity so low?”
   • “This gives 4–5% — is that okay?”
4. Then they discover term insurance.
5. Then comes guilt, confusion, sometimes panic.

Let’s pause here. If this is you — you didn’t mess up. You just chose based on what you knew then. Now you know more.

And if someone else depends on your income — spouse, kids, parents — this question becomes even more important.

Because now, it’s not just about what you need. It’s about who would need something if you weren’t around tomorrow.

💡 Let’s Clear This Up

Term insurance and traditional policies do completely different jobs.

Traditional Plan	Term Plan
Savings + some cover	Pure protection
Returns ~4–5%	No return unless claim
Expensive for low cover	Cheap for high cover
Feels like “something is coming back”	Feels like “I paid and got nothing” (until you need it)

So the question isn’t “Which is better?” It’s: “What role does each one play in your life now?”

Especially if someone is financially dependent on you — you want insurance that covers the real financial gap. Not just a token cheque that won’t last 6 months.

As a thumb rule, your term cover should be: 10–15× your annual income (or enough to replace your income for the next 15–20 years)

📌 One Thing That Stays With Me

I once met a couple in Behala. Both school teachers. Lovely people.

They had 6 traditional policies. Combined life cover? Around ₹6.5 lakhs.

When I asked them, “If something happened tomorrow — would that amount protect the family?”

They looked at each other. And said nothing.

A week later, they kept their old policies — but also took a ₹50 lakh term plan.

They didn’t cancel what they had. They just added what they were missing.

They had a daughter in Class 7. They didn’t want her future to depend on LIC bonuses.

“Old plans may not be mistakes. But if they’re your only plan — that’s a risk.”

💭 So What Should You Do?

• Check the coverage.
  If your traditional plans give you only ₹3–5 lakhs cover — that’s not real protection. It’s a bonus. You still need core coverage.
  Especially if someone depends on your income.
• Don’t rush to surrender.
  If you’ve already paid for 6–7 years, surrendering might hurt more than help. Know the numbers first.
• Consider layering.
  Add term insurance for protection. Keep old plans for their savings/maturity role.
• If it's really not working, exit smartly.
  You might be better off stopping premiums (if lock-in is over) and repurposing that money. But don’t decide on emotion. Get help.

❓A Few Real Questions

Q: What if I have 3 policies but no term plan?
A: You have savings plans — not protection. Add term cover. Don’t rely on maturity to save your family.

Q: Should I stop old policies?
A: Depends. Sometimes, keeping them makes sense. Other times, it’s okay to exit smartly. Don’t guess — review.

Q: Is buying traditional policies always wrong?
A: No. They just shouldn’t be your only plan. And you should know why you’re buying one — not just who is selling it.

🌱 Before You Decide…

If this post felt like your own story — take a moment.

You don’t need to regret old decisions. You just need to review them with someone who won’t judge.

Maybe that’s me. Maybe that’s someone you trust offline.

Either way, one simple question helps:
“If something happens tomorrow — what will these plans actually do?”

And if you have financial dependents — ask yourself: “Will this keep them okay for years, or just a few months?”

If the answer feels unclear — don’t leave it like that.

“Financial maturity isn’t about perfect choices. It’s about pausing to ask — ‘Is this still right for me?’”