All life insurance companies in India have term plans in their bouquet of offerings. The rates are also quite competitive. So it really does not matter which company you take the cover from (IRDA has done a pretty good job at regulating the insurance companies – all of them are safe). Based on your comfort level with the sales person and the previous experience with the company, you may choose to take your term plan.
Have we all met our favorite life insurance agent selling to us insurance plans for our children, for our retirement, for our parents, for our house and so on and so forth? Oh Yes, of course. Have any of the agents suggested a plan called as a term plan to you? If your answer is NO, its time you looked for somebody else for your insurance requirements.
What is it? And…
Why is the term plan so important? Because, it is the most basic of all plans. Term plans are products which are plain vanilla (no frills/bread) that give us very high life covers for very low premiums. But term plans do not give any thing back at the end of the term (life cover period) if you outlive it. Agents / sales persons de-sell these plans using this feature to tempt us to high premium plans that do give us something back. However, term plans are able to give us high covers exactly because of this feature.
Most of the other insurance plans are built around the Term Plans or have the term plans as a part of them. As the features get added, the premium also increases. But many times the premium increase is very steep as the commission (to the agent) and company charges increase as a percentage of the premium. This increases the premium rapidly in value terms. Let me explain with an example: 10% on Rs.100/- is Rs.10 which most of us could afford. The same 10% on Rs.20,000/- is Rs.2,000/- which is a big amount for most of us.
Insurance Buying Scenarios
Since most of the agents / sales persons are taught to sell the cream (not the bread), we end up among any of the 3 following scenarios:
Take an insurance plan that we need but at premiums that we could not afford
Take a plan that we do not really need
Do not take any plan; effectively postponing a need.
The fourth possible scenario is to ask the sales person for a term plan.
Premium Amount Comparison
Let us compare term plans with one other product which also does not give anything back at the end of the term – Vehicle Insurance. Though the basic features and coverage are different, I have found that the perspective got from the comparison is an eye opener for my clients and my training participants.
The two wheeler full cover (third party + owner accident cover for Rs.1,00,000/-) insurance premium for a vehicle with Rs.35,000/- vehicle value will come to about Rs.900/- per year.
A four wheeler full cover insurance premium for a vehicle with over 1500 CC engine capacity and current value of Rs.10,00,000/- (Rs. Ten Lakhs) will cost about Rs.28,000/- per year. (Less than 1500CC engine capacity will set us back by about Rs.25,000/- per year.)
Compare that with the premium for a life cover of Rs.10,00,000 (Rupees Ten Lakhs only) for a 35 year old male. The premium here will come to only about Rs.4,300/- per year.
Perspective Compared to Vehicle Insurance
See the difference in rates? I do take up insurance for my vehicle because it is mandatory and the traffic police man at the next corner may charge me for not having one. And anyway I don’t get the premium back, unless there is an accident.
But for my own life, I don’t take up a term plan (which costs only 17% that of my vehicle) because the plan does not give anything back?????? Common sense, where art thou? Do we love our car and bikes more than our family members??? Or is it that we are so used to the police man at the next corner that we have forgotten to think?
Jai Ho Term Plans
All life insurance companies in India have term plans in their bouquet of offerings. The rates are also quite competitive. So it really does not matter which company you take the cover from (IRDA has done a pretty good job at regulating the insurance companies – all of them are safe). Based on your comfort level with the sales person and the previous experience with the company, you may choose to take your term plan.
There is no monetary value for peace of mind. For everything else do take a term insurance cover.
Have we all met our favorite life insurance agent selling to us insurance plans for our children, for our retirement, for our parents, for our house and so on and so forth? Oh Yes, of course. Have any of the agents suggested a plan called as a term plan to you? If your answer is NO, its time you looked for somebody else for your insurance requirements.
What is it? And…
Why is the term plan so important? Because, it is the most basic of all plans. Term plans are products which are plain vanilla (no frills/bread) that give us very high life covers for very low premiums. But term plans do not give any thing back at the end of the term (life cover period) if you outlive it. Agents / sales persons de-sell these plans using this feature to tempt us to high premium plans that do give us something back. However, term plans are able to give us high covers exactly because of this feature.
Most of the other insurance plans are built around the Term Plans or have the term plans as a part of them. As the features get added, the premium also increases. But many times the premium increase is very steep as the commission (to the agent) and company charges increase as a percentage of the premium. This increases the premium rapidly in value terms. Let me explain with an example: 10% on Rs.100/- is Rs.10 which most of us could afford. The same 10% on Rs.20,000/- is Rs.2,000/- which is a big amount for most of us.
Insurance Buying Scenarios
Since most of the agents / sales persons are taught to sell the cream (not the bread), we end up among any of the 3 following scenarios:
Take an insurance plan that we need but at premiums that we could not afford
Take a plan that we do not really need
Do not take any plan; effectively postponing a need.
The fourth possible scenario is to ask the sales person for a term plan.
Premium Amount Comparison
Let us compare term plans with one other product which also does not give anything back at the end of the term – Vehicle Insurance. Though the basic features and coverage are different, I have found that the perspective got from the comparison is an eye opener for my clients and my training participants.
The two wheeler full cover (third party + owner accident cover for Rs.1,00,000/-) insurance premium for a vehicle with Rs.35,000/- vehicle value will come to about Rs.900/- per year.
A four wheeler full cover insurance premium for a vehicle with over 1500 CC engine capacity and current value of Rs.10,00,000/- (Rs. Ten Lakhs) will cost about Rs.28,000/- per year. (Less than 1500CC engine capacity will set us back by about Rs.25,000/- per year.)
Compare that with the premium for a life cover of Rs.10,00,000 (Rupees Ten Lakhs only) for a 35 year old male. The premium here will come to only about Rs.4,300/- per year.
Perspective Compared to Vehicle Insurance
See the difference in rates? I do take up insurance for my vehicle because it is mandatory and the traffic police man at the next corner may charge me for not having one. And anyway I don’t get the premium back, unless there is an accident.
But for my own life, I don’t take up a term plan (which costs only 17% that of my vehicle) because the plan does not give anything back?????? Common sense, where art thou? Do we love our car and bikes more than our family members??? Or is it that we are so used to the police man at the next corner that we have forgotten to think?
Jai Ho Term Plans
All life insurance companies in India have term plans in their bouquet of offerings. The rates are also quite competitive. So it really does not matter which company you take the cover from (IRDA has done a pretty good job at regulating the insurance companies – all of them are safe). Based on your comfort level with the sales person and the previous experience with the company, you may choose to take your term plan.
There is no monetary value for peace of mind. For everything else do take a term insurance cover.
Source: www.bankbazaar.com
0 comments:
Post a Comment