If there is anyone dependent on your income - parents, children, relatives - you need life insurance
Have you ever been approached by anyone in your lifetime to buy life insurance?
Have you ever contacted any life insurance company yourself?
Have you ever felt the need to know how much life insurance coverage do you have on your life?
Have you tried to calculate the right amount of life insurance coverage that you need?
If you never thought about the above questions, this chapter is for you.
Research says that 79% of Indians bought insurance through agents only.
Insurance is a subject matter of solicitation, says the disclaimer! Wonder why? Due to the long-term commitment and complex nature, 95% of all online purchases also need human interaction. Even then, insurance penetration has increased from 2.7% to only
3.8 % over the last 18 years compared to 6.3% globally.
Even with digitalisation, smartphones and app environment, buying of life insurance still needs human assistance. Why?
Research done amongst my clients over two decades indicates that 90% of my clients are not even aware of the exact amount of life insurance coverage that they have!
Only 20% had a term insurance policy.
60% agreed that they have inadequate life insurance coverage.
I have felt in my two decades of life insurance industry experience, that it is a seller’s market. With huge commissions driving the advisors, they have first to understand the complicated insurance market, plans and then market it effectively.
The need to understand the need and want of a customer can take a set back. Online aggregators may be a convenience for only 4%; the need to understand, calculate and then give the premium comparisons may remain.
During my practice, I found that agents try to promote only traditional policies like endowment plans and money-back policies.
In this pursuit, they mislead people by claiming as to how it is unwise to pay the premium and get nothing in return. When you buy an insurance cover, remember not to mix investments with returns! It is not a wise decision! Which is why the money - back plan or endowment plans are not suitable. While buying an insurance policy, always purchase a term plan and get significant coverage at a much lower premium.
All insurance advisors have targets; sometimes, they mislead people into buying a policy, which might not be the best option for them. For every policy they sell, agents earn a commission. The commission varies from policy to policy, and most agents try to sell policies which offer them the maximum commission. If you have money that you want to invest, you can invest it in mutual funds which provide moderate returns. You need to know that insurance agents receive more commission on certain life insurance policies; which is why they push you to buy it. Stay informed to avoid such traps and buy a policy that suits your needs the best.
- Your life insurance is the need for protecting your income and financial goals
- You need to calculate this amount based on your income and future loss
- With this amount in mind, let’s say Rupees 1 crore, now you need to find out the best and most suitable option to get your life
- Buy only term insurance as it the most economical It incorporates only the essential cost of your life insurance, with no investment component. It would help you if you did your investment part elsewhere.
- Do you need life insurance? Once a client brought his son to our He said, “please give him a crore of insurance cover. He has got his first job.” I educated him that since he didn’t have any liability and there is no one financially dependent on him, why would he waste precious money on paying his life insurance premium?
- Calculate the exact need for the life insurance Consulting an excellent financial planner will lead you to the right amount of coverage required. The financial planner would be able to arrive at this amount after understanding your age, income, liabilities, household expenses, liabilities, financial dependents and all such essential factors. Taking the inadequate amount of insurance coverage would lead to unnecessary saving of the premium. On the other hand, taking excess leads to wastage of money.
- Look at insurance companies
- Which have excellent track records, in terms of claims paid out
- While the brand is important, but it may not be the least important!
- Look for basic pure insurance called as term insurance from these online options of the insurance companies and add no other options as riders, when
- The claim settlement ratio of the life insurance companies indicates their excellent So, the ratio suggests the good underwriting capabilities of these insurers. Both at the policy sale stage to the point of claim settlement, the ratio always gave me an indication of the elimination of fraud and misrepresentations during claims.
- Don’t expect the same premium
- that you see online as that may change after you submit the form or after the medical tests
- what you need to understand is that you need to compare the final premium rates, including
- the online quote that you see from different insurance companies is just an estimate for an ideal height-weight person, and this may vary after your
- Time: You need to know the last age till when your dependents or your liabilities, You don’t need to have coverage after that particular need is over. My research confirms that it can lead to over 50% of the unnecessary higher premium from your current age until the premium paying period ends. Be careful to understand this huge difference and save a massive amount of money.
- Despite the availability of joint life insurance coverage, I would not suggest Due to differential health status, need and want of the coverage, the premium for a joint policy may vary. It may not suffice the real need when it arises.
- Keep yourself abreast of the latest changes announced by the regulator of the insurance industry - Like in August 2019, came the changes in term, pension, endowment, ULIP policies. Pension plan withdrawal of up to 60%, will give you better flexibility from investing it in better avenues. Two years minimum required for acquiring surrender value in traditional plans will help policyholders in a big way. You needn’t wait for three years for your policy to acquire a guaranteed surrender value. It is an amount that you will receive if you decide to exit prematurely. The new feature to reduce the premium after the policy has completed its first five years will help. Any financial emergency can bring in the inability to further pay the full premium. Reducing the premium to 50% and to continue the policy, is an added advantage now.
- Myths about having life insurance beyond the age of 60, only support wrong beliefs! For supporting spouse financially, one should have made sufficient Your children would be already financially independent. All kinds of loans and other liabilities should be over by now. Hence, it is only wastage of money to continue life insurance coverage, beyond the last financial commitment age like 60. After all, you have retired also, and there cannot be any financial loss now with your death!
- Disclose all the material information
- don’t expect the insurance company to find out any such critical factors during medical tests if
- Lifestyle realities like your smoking or drinking should be correctly informed, and other professional hazards need to be declared like your flying or occupational
- It is a material fact sharing in your application and how honestly have you declared it while
- Hiding any such information can lead to the claim being rejected, and the whole purpose of buying insurance gets defeated
- Keep updating your insurance policy every five years since technology changes, and so does your financial fact-sheet and liabilities
- Declare all your health material Do not hide any adverse health conditions today or in the past. Your smoking or drinking habits, if not declared today, may emerge later during claim investigation, leading to full claim repudiation. I have observed that some individuals try to hide information when filling out the insurance application form. Ensure that all personal credentials and medical history are submitted accurately to the insurance company. Any kind of misinformation now can lead to severe difficulties during the claim process.
- Suicide coverage: Now, even 80% of your life insurance cover shall be paid out in the first year, should anyone plan to do so! Earlier, it was after the second
- Now, if you have undergone all the tests and documentation and have received the policy in hand
- You need to check for all your personal details being mentioned correctly on the “policy schedule” page and the “Policy Bond” as these two are the most important documents for all claims purposes.
- Check for your email, mobile, nominee, spelling details and ensure updating regularly.
- Make your family and the beneficiaries aware of your insurance It will be useful to take care of the original policy bond as it would be required; it would be necessary to submit, along with the following documents, at the time of the claim:
- Original policy bond will be required at the time of claim. Keep it secure and safe.
- Identity papers of the claimant like relationship proof or It could also be the legal evidence of title in case the insured has not appointed a beneficiary.
- Deeds of assignment: in case there was an assignment done like, it is done, for loan security.
- Let’s look at an online option
- For those who are net savvy and are used to net transactions.
- You need to take care of some very important pre and post precautions to ensure you buy the most appropriate and actually useful insurance
- Now comes the online application
- Wherein you have to fill in all information like your name, email, contact details as well as personal details like height, weight, medical history, current and past illnesses or operations or surgeries undergone correctly and honestly.
To Conclude, learn and understand the above points very carefully. After all, you are only planning and buying peace and happiness for your family.
While you may plan all the riches for your family, you should also ensure that they all able to maintain the same lifestyle and facilities, even if you are no longer there with them.
They should always be happy that you left with such good care and money for them.
Their caring and love have thus become an essential factor in your journey of happiness, joy and satisfaction in your life, today itself.
Plan your life insurance well.
Buy happiness, for your near and dear once.
Enjoy life today.
Be happy to have bought peace and happiness for your family in the future also.
To conclude, do your best while selecting and choosing your insurance policy and now onwards, don’t worry too much.
Have a great life, feel good to have taken such a wonderful decision and rather feel proud to be in possession of an asset like paper in hand.
Taressh Bhatia is a CFPCM CERTIFIED FINANCIAL PLANNER CM and is the founder/partner of Advantage Financial Planner LLP – A firm Registered with SEBI (Securities and Exchange Board of India) as RIA (Registered Investment Advisor).
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