Wednesday, 25 January 2012

Facts about Term Insurance

In our day to day life, we always want something that is BEST. How would it be if it is “CHEAP AND BEST”? You are anxious to grab such an offer?
Term insurance is the only Life Insurance product that is genuinely CHEAP AND BEST.  In spite of this, Term Insurance is not popular or I can say people don’t want to go for Term Insurance? Or more, they don’t even know much about it.
What is Term Insurance:  Term Insurance is a pure risk coverage life insurance plan. In case of death of the policy holder, the family gets the assured money. Term Insurance is exceptional financial product to manage risk.  There are no maturity benefits.
     
Why Term Insurance not so popular?
·    Agents are not willing to sell them. The commission they get is quite low when compared to any other Insurance Policy.
·    Investment advisors do not provide adequate information of Term Insurance Plan
·   Insurance companies showcase investment cum Insurance products(Endowment/Ulip)
·    People perceive life insurance to be Tax Saving and Investment  product.
·    People do not want to buy them for silly reasons (No survival or Maturity benefits)
·    People think buying a Term Insurance Policy is waste of money as they think the probability of death before 60 or 65 is less
·    There is portion of crowd who gear up to buy a Term Policy but take U turn the moment they are made aware of the process involved (Medical Tests, ITR for last 3 years or so.)
Before we dig in further, lets us reiterate “Term insurance” is only the real insurance that gives you highest cover at a very nominal premium. Term Insurance is a “No Nonsense” product that covers life and nothing else.
I am sure by now you are having various questions haunting your mind. Questions like:
·     What are the different ways of buying Term Plan?
Answer: These are only 2 ways, online way and Offline way. Premium is less in case of online, as there is no agent commission involved.

·     Types of Term Plan?
Answer: There are again two type of Term Plan, Term Plan - Without Return of premium and Term plan with return of premium.  Premiums are cheaper in case of plan that do not return premium.

·     What should be the ideal Cover?
Answer: Simple answer can be, at least 8 to 10 times your Gross Annual salary + all your liabilities like home loan, and other loans + Money you would need for future Goals like kid’s education.

·     I need One Crore; does it make sense to split the cover into 50 Lakh each policy?
Answer: Ideally it makes sense to split your insurance. Fundamentally in finance world diversification is the keyJ.  Splitting your cover has couple of advantages. 1) Down the line when you have some handsome wealth and you think you need a lesser cover, in this case you can terminate one of the policies. 2) In case of claim settlement if there is delay from one of the insurance company, you have the other to bank on.

·     How do I choose the right Insurance Provider? Are there any parameters to watch for?
Answer: Remember Cheap need not always be best. Settlement ratio and Reputation of the company are the two most important factors to watch out for. Premium Comparison should be last on your list.

·    Are there any precautions that one can take so that there is less rejection of claims later?
Answer:  Read the fine prints thoroughly. Don’t be in hurry while entering your details. Provide correct and accurate information. Don’t hide if you smoke or drink or had an operation. Never allow your agent to fill the form on behalf of you. Last but not the least, if you are calling an agent, make sure the person is reliable, experienced and will not let you down when you really need him the most.


4 comments:

Anonymous said...

How do I analyze Settlement ratio and Reputation of the company. I checked the premiums of various companies and they vary a lot. Where do I get the settlement ratio. Please advice.

WealthUCreate said...

Here is the link where you can get settlement ratio information. http://www.irda.gov.in/IRDAErrorPage.aspx more over this article might interest you...

http://www.wealthucreate.com/2012/04/how-to-choose-right-insurance.html

let me know if you have any other query

Anonymous said...

The link provided (http://www.irda.gov.in/IRDAErrorPage.aspx) does not work.. Tried several times and it gives error to check again later..

The link itself says "ErrorPage"..

wealthucreate said...

Trust me... this did work few days back. If my memory goes right, LIC, HDFC and ICICI are having good settlement rate (above 90%). I will post your query on investta.com. This is great forum for discussion of finance related stuff. You can find the link on my blog roll. I will try my best to provide any other information that i get on this.

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