How to say NO with out saying NO, to Insurance Uncle.

April 21, 2019

So many times in our life, we face this situation that someone from our distant family for friend circle – UNCLE (even Aunts too) are themselves Insurance agents and try their level best to sell an insurance policy to us. Many a times, you, can’t say clear NO. But deep in your heart, you don’t want yourself to be tortured for that emotional blackmailing. What to do? How to say No?

Very simple – let the person come to your house. Welcome him/her. Sit with the person. Offer tea/coffee with snacks. Indulge in casual chit chat and wait for the marketing push. The uncle/Aunt will slowly open up and tell you a new insurance plan, tailor made for your needs. Listen carefully. Talk about it. Understand it. Cross questioning something to clear your doubts.

Now ask to calculate the premium of sum assured for 50 to 100 times of your yearly income. One small caveat – ask the premium in monthly mode. Fill the application form all by yourself. Pay that monthly first premium cheque, if money is in your budget. In all probability, even the monthly premium will be out of your budget. Ask the same person to help you with the shortfall in the premium.

Now your application will go into processing. Seeing the sum assured applied for and the income band you are in, the policy will be rejected by insurer itself.

So it’s the person, who will say no to you now. Go and enjoy it.
You may face counter offer of reducing your sum assured so that policy can be clicked. Now is the time to negotiate a term plan for same sum assured. Premium will be less than endowment policy. But stick to sum assured. You again know the outcome in advance.

Example of above thing.

If your yly income is say 5L, opt 2.5Cr or 5Cr policy in Jeevan Anand type plans.

Please apply this thing next time, you are in this situation and share your experience here in comment section.

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Term Plan beyond earning age: Is it Worthy?

November 27, 2018

Indian Life insurance landscape has changed a lot in last 2 decades or so, since the private insurers were allowed to operate in India. There was a time, only LIC was there as a monopoly and in the name of term plan, the product basket was near empty. Yes, those of you, who are old enough and might had purchased, there were plans like Bima Kiran, having Sum Assured ranging from few thousands to single digit lakhs. On top of that, this was a RETURN OF PREMIUM PLAN – ROP.

Look at today, we have 24 life insurance companies as on date (Source) doing business in India. Each one of these are having various combinations of Term Plans. One interesting observation caught my eye. Almost all insurers are now offering Term Plans well beyond the Retirement age in India. Ranging from 75 to 80Y age and few insurers are offering plans up to age 99 to 100.

A basic question to my blog readers and this is also the header of this blog post – Is it worthy to have a term plan going well beyond your retirement age, till 75-80-99-100?

To answer the above question, first we need to answer few associated questions?

  1. Why do we need life insurance?
  2. Why do we need purest form of life insurance – Term Cover or Term Plan?
  3. How much sum assured one needs to have in term cover?
  4. Do we need to purchase Riders along with Term cover?
  5. What premium payment term -PPT, should we have for our Term cover?

Let’s discuss the answers for above questions –

  1. To cover the financial loss, of our income, we bring to our families and dependents, resulting out of our DEATH.
  2. The premium for a high sum assured + investment – combo policy will be so high that We can’t afford to pay. Also it’s advisable to keep INSURANCE and INVESTMENT needs separate.
  3. There are various ways to assign Human Life Value but the most simplistic is to have a Sum assured, which can substitute your income, if the same money is kept in a simple product like BANK FIXED DEPOSIT. In simple words, 15-17 times multiple of your yly income can generate the same income, at current Bank FD interest rates of 6-6.5%. One bonus information, Most insurers don’t offer term cover beyond 20 times multiple of your yly income, taken together your all life insurance policies’ sum assured.
  4. Please avoid riders along offered for a premium with your term plan, as these are neither offering adequate money not cover for the intended use and are very restrictive in their own definitions.
  5. If you are a salaried or a professional with a fixed and predictable monthly income, opt for Regular Premium Payment Term. Limited or Single Premium Payment Term should be opted only by those people who are not sure of their future cash flows.

Here comes the interesting part – Your responsibility towards your family or loved ones’ bright future doesn’t end with purchasing merely a Term Plan and paying it’s premium regularly. No. Purchasing the term plan, is merely the first step. Once it’s taken, the logical next step is to start working on creating a corpus, which is large enough to sustain your dependents in your absence, till your desired time. Once this corpus is in place, answer on your own, do you need a TERM COVER?

In several discussions with people, either over phone calls or in our Facebook group – asan ideas for wealth or one to one chats, one thing I noticed – people don’t see it wrong to purchase term cover well beyond earning age and the primary reason given – this sum assured will help a bit or become a gift, to my loved ones (specially the 3rd generation).

My view – If during your earning years, you could not create enough corpus to sustain your own retirement life as well as to leave some inheritance for your next generation, it indicates a failure of financial planning done by you during your productive years – Active Income Earning Years. Barring few exceptional cases where due to late marriage or late child births or any other special family situations, most people will be able to complete their financial obligations towards family members and loved ones, either through active income already or by creating enough corpus for the intended use, if events are to be happened in post retirement life.

Now Sample this, if a 25Y old person purchase a term cover of Rs. 10000000 (One Crore) till age 100, what’s happening in terms of TIME VALUE OF MONEY? We are aware that INFLATION eats away the purchasing power of our money. On a simple note, if inflation is 7%, the Rs. 100 in our pocket today, will only be worth of Rs. 93 (adjusted for 7% inflation) after 1Y, in today’s value. Please go through the attached excel sheet to notice the impact of inflation over your lifetime for your sum assured.

time value of 1 Crore till age 100

Now answer honestly, how much happy will be your loved ones at your age 100, if you gift them money through your DEATH CLAIM which is equal to Rs. 43274 at your age 25? It can’t even cover your FUNERAL EXPENSES.

 


Health Disclosure During Life Insurance Purchase: A real life example

June 29, 2013

Insurance

Many a times people purchasing life insurance policies, do not take care to fill the health declaration form seriously or they themselves want to declare but the Agents do not disclose properly. How this mistake can prove your loved ones costly in your absence, you ‘ll understand after going through the next few lines below.

The Background- Mr. Pradeep Dumbu, one of the member of our Facebook Group shared his own experience related to health disclosure while purchasing a Life Insurance Policy.

Quote – I belong to a village in Andhra Pradesh. My father was an Investor in Sri Ram Chit Funds. Later on the chit collection agent sold an endowment policy from Sri Ram Life Insurance Company of Sum assured 100000 Rs. to My father in 2006. At the time of filing the application form, my father told the agent that He is diabetic for past 20Y but the agent told that it’s not an important issue & as the sum assured was small, no Medical test was carried & policy was issued. My father were paying the prem. regularly. Last Year my father died & when me & my mother filed claim, the Insurance Company denied the claim, stating the reason that Father’s Health Condition of being Diabetic was not disclosed at the time of purchase of the policy. What should I do now to get our insurance amount from the insurance company?

Unquote- All of us now can understand that Insurance company is not honoring even a small claim amount of 100000 Rs. & being an endowment policy, the overall deal is not that much in loss to Insurance Company. Still this real life incident teaches us a valuable lesson. What can be the impact of wrong or understated health declaration while purchasing a Term plan where Prem. is very less & the Sum assured is very high?

What’s your take now on reporting your & your family’s health condition & history while purchasing a life cover? Please share your learnings in the comment section below.


Life Insurance: Real Life Example

June 28, 2013

Insurance

Many a times, we receive e-mails from the readers to thank us. Once in a while we do receive some interesting e-mails. here I’m reproducing one such mail received from Mr. RajKumar.

Quote –

Manish,Ashal – I should thank you as much as I can for the financial awareness that you have set on me. This is one incident that happened @ my home today. I wanted to share with you.
I have a 7 month old baby. We used to make him sleep in a cradle. Not a wooden cradle. We used to hang a big cloth stitched specifically for making the baby sleep. We use this from the cieling of the wall and swing it to make the baby sleep. Off late, we started placing a small bed below the cradle so that even if the baby falls from the cradle – it ll land up safe rather than hitting hard on the floor.When I started using this bed below the cradle, I explained my wife this is called as Insurance 🙂 (Thanks to the 1st book where Manish explained about the insurance options that we use on a day to day life like Helmet etc).
Today,my kid slept and I moved out of the room. After sometime, I heard my baby crying. When I went there I saw my kid on the floor and partly on bed. He actually fell from the cradle. The good part is there was no injury to him.. He was ok in sometime.
After all the chaos at home, I told my wife our insurance saved us.. She laughed 🙂 Had this been a thin sheet of cloth – it should have been Jeevan Anand (which was the only insurance that I had before I knew Ashal).. This bed was better which is pure term insurance 🙂 It really taught me a good lesson today. More importantly, my son gave me this wonderful lesson as a gift to me on my birthday today.
I would like to thank both of you for all the knowledge that you have shared to me so far.
Unquote –
That was a simple yet effective example from daily life for what is Risk coverage all about. What are your learnings from the post. Please feel free to share.

 


ICICI Pru Life’s Online Term Cover – I Protect

August 18, 2010

Insurance

Dear friends, Earlier it was Aegon Religare’s I- Term, the lone player in online Term cover Market but now it has a companion from the big daddy of private life insurers in India – ICICI PRU Life. The product is named as I-Protect.

Product at a glance –

Minimum /Maximum Age at entry – 20 / 65 years

Policy Term – 10, 15, 20, 25, 30 years

Maximum age at policy expiry – 75 Years (Age completed Birthday)

Minimum Premium – 2000 Rs. (Excluding Service Tax & Education cess)

Accidental Death Benefit (Available with IProtectOption II only) – Equal to basic sum assured with maximum limit to 50L

Premium Payment term – Regular pay

Mode of Premimum Payment – Yearly only

Tax benefit – Prem. paid is eligible for Tax benefit under Section 80C of Indian Income Tax Act, 1961

Available Options – Option I Basic Life cover, Option II Basic Life Cover With Accident Death Benefit Rider

Death benefit – Option I – Basic Life Cover

Option II – Basic Life Cover + Accident Rider Sum  Assured equal to Basic Sum assured or 50L whichever is lower

Instant Life Cover – Policy ‘ll be issued immediately after realization of the prem. amount by the Ins. Co. for Non Medical Cases.

Maturity Benefit – Being a pure Vanilla Term Cover, there is no maturity benefit.

Offline Purchase – Yes allowed with a slightly higher prem. (To include the commission of Agent/Broker)

My take – I-Protect is a real competitor for Aegon Religare’s I-Term. Actually it’s better than I-Term. How here it goes –

Max. Term – 30Y in I-Protect for 25Y in I- Term

Accident Rider – Yes for I-Protect no for I- Term

Offline Purchase – Yes for I-Protect no for I-Term

Maturity Age – 75Y for I-Protect  where as it’s 65Y for I-Term

The major plus point with I-Protect, ICICI Pru Life has offices, agents, brokers, bankassurance channels in every nook & corner of India, Hence purchasing the cover online of offline is very easy as compare to Aegon Religare’s limited presence.

In my view, if you are planning to purchase your first Term cover or want to increase one, go for this one.

For More info about the product click here.

Thanks

Ashal


Life Cover may got cheaper

August 16, 2010

Dear Friends, Please check the link below.

http://www.business-standard.com/india/news/life-cover-may-get-cheaper/404663/http://www.business-standard.com/india/news/life-cover-may-get-cheaper/404663/

Thanks

Ashal


Annuity Payment options against Pension Policy

July 7, 2010

Please guide me as to how to decide about selection of proper option from the following options offered by Pension Plan :

1. annuity as long as one annuitant lives

2. annuity guaranteed for 5, 10, 15 or 20 years and life thereafter

3. annuity with return of purchase price to nominee

4. annuity payable for life increasing at a simple rate of x%

-Vinayak Bapat

Dear Vinayak, each of the option listed by you has it’s own pros & cons.

1. Annuity for life – In this case the annuity amount is highest but the annuity stops the moment, annuitant dies. In this option, If there is a surviving spouse, S/he ‘ll not get any more annuity from the annuity provider. This Option is beneficial to the persons, where no spouse is there to survive or extra provisions are already there for spouse.

2. Annuity Gtd. for a certain period – In this option, the Annuity is provided for a certain period no matter, annuitant is alive or not during the full period. In case of premature death of annuitant, this option ‘ll provide annuity till the gtd. period is over. If the annuitant survives the gtd. period, the annuity ‘ll continue till the death of annuitant & ‘ll stop after her/his demise. This option is beneficial again for persons, where there is a surviving spouse & there is a history of early death in the family.

3. Annuity increasing with a simple rate of 3% – This type of annuity ‘ll provide a small cushion towards inflation in the later part of life. The amount of annuity is lower here than the prev. 2 discussed. Here again the annuity stops after the death of primary annuitant.

4. Annuity with return of purchase price – Under this type, annuity is paid first to annuitant till life than to spouse till life & after that the purchase price is returned to the nominees of the annuitant. The payment in this type of annuity is lowest. This is suitable to the persons who wants to leave a fortune for their heirs after their demise.

Thanks

Ashal