There's a document every insurance intermediary sees and almost no customer ever does: the commission grid. I saw my first one more than ten years ago, and it explains nearly everything about how life insurance gets sold in India. On a traditional endowment or money-back plan, first-year commission has historically run as high as 30–35% of the premium. On a pure term plan, the percentage looks similar on paper — but the premium itself is a tenth the size, so the rupee amount is tiny.
Sell a 30-year-old a ₹60,000-a-year endowment plan and the first-year payout to the seller can approach ₹20,000. Sell the same person a ₹1 crore term plan at roughly ₹13,500 a year, and the seller makes a few thousand rupees. Once. That single gap is why you've been pitched “insurance that also gives returns” your whole adult life, and almost never pitched plain term cover.
At PlusFinance we sell only term insurance. Not mostly term. Only. We turn down the higher-commission products entirely, and I want to walk you through the maths that made that an easy decision, because it's the same maths that should make your decision easy too.
What ₹60,000 a year actually buys, both ways
Take that same 30-year-old, non-smoker, and give him ₹60,000 a year to spend. Route it into a typical traditional plan and he gets a sum assured somewhere around ₹12–15L, plus a maturity value at year 20 or 25 that works out — when you run the actual IRR on the guaranteed portion — to roughly 4 to 5% a year. That's not my opinion. Take any “guaranteed return” illustration you've been shown, put the premium outflows and the maturity inflow into a spreadsheet, and ask it for the XIRR. I do this with clients regularly. Nobody has yet brought me an illustration that cleared 5.5%.
Now route the same ₹60,000 the boring way: ₹13,500 buys ₹1 crore of term cover to age 60, and the remaining ₹46,500 goes into an equity mutual fund SIP. At 11% — below the long-run return of broad Indian equity indices — that SIP is worth roughly ₹33L after 20 years. So the comparison is ₹12–15L of cover and a corpus growing at 4–5%, versus ₹1 crore of cover and a corpus that compounded at market rates. Same money. One route pays the seller twenty thousand rupees upfront. Guess which one.
4.5% isn't a return. It's a slow leak.
India's consumer inflation has averaged in the region of 5–6% over the last two decades. A product returning 4.5% in that environment isn't growing your money — it's shrinking it politely, one year at a time, while sending you statements that make the shrinking look like progress. The word “guaranteed” is doing a lot of work in these pitches. What's guaranteed is a nominal number. What's equally guaranteed, and never mentioned, is that a kilo of dal will cost more in 2046 than it does today.
I want to be careful here, because this matters: these are legal, regulated products from legitimate companies, and for a very small set of buyers — someone who genuinely cannot hold an equity investment without panic-selling it — a forced-discipline product has an argument. But that's maybe one client in fifty. The other forty-nine are buying a 4.5% product because the person across the table earned more by not explaining the alternative.
Why boring wins
Term insurance has no maturity value, no bonus statement, no anniversary letter telling you your fund value went up. If you outlive the policy — which, happily, is the most likely outcome — you get nothing back. People hear that and flinch. But that flinch is exactly the trap. You don't want your fire extinguisher to double as a cooking appliance. You want it to do one job completely: if you die during your earning years, your family gets a crore, not twelve lakhs.
Insurance is for protection. Investing is for growth. Every product that promises both does both badly, and the commission grid tells you why it exists anyway. That's the entire pitch for term insurance. It's boring, it's cheap, it pays the seller almost nothing — and it's the only life insurance product I'll put my name behind.
If you already own one of the other kind
Don't cancel anything after reading one article — surrendering a traditional policy has real costs, and whether to exit depends on how many years you're in and what the surrender quote says. I've written separately about that exact calculation. But do run the XIRR on your own policy this week. Premiums out, maturity value in, one spreadsheet function. If the number that comes back starts with a 4, at least you'll be deciding with your eyes open, which is more than the original sale gave you.
This article reflects our firm's general views and illustrative calculations for educational purposes and isn't a substitute for advice on your specific policies, whose terms vary by insurer and product.