Buy term insurance, but BUY it online
This is perhaps the worst possible line that the life insurance industry wants to see…..
Why?
Simply because the life insurance industry exists for itself, not really for the client. So the industry does not want to antagonize the agent. The agent feels that he is doing the sale, the paper work, convinces the client if there is a rate up…..so he has a legitimate role to play.
So what all will the Industry tell you:
1. Sir life insurance is a complicated product, please buy it through an agent.
2. Sir somebody will have to co-ordinate regarding the paper work – WHAT happens if you die, who will process your claim?
3. Sir in a term insurance you will GET BACK NOTHING! all your money is wasted, please buy a ULIP – it is a great combination of investment AND life insurance.
4. Sir we have a product which is a combination of investment and life insurance and sir IT IT NOT A ULIP!!
5. Sir we have an even better product – called ‘Term insurance WITH return of premium’ – much better than a term which does not give back your premium!!
What should you do?
Best? disconnect and go and buy a cheap online term insurance.
As simple as that. Or tell me why all these 5 statements are wrong..and I will tell you whether you are wrong or very wrong or completely wrong. LOL…
a simple test…tell me why all these 5 statements are completely AGAINST your interest….
Guest
Most of the online term insurance are from companies which have a pathetic claims settlement record. LIC has the best settlement ratio. It doesn’t have an online term plan.
Paying more money offline is better than wasted money online.
Hari
1. “Sir life insurance is a complicated product, please buy it through an agent.”
Ans: It’s complex if it is not term insurance. If it’s term insurance then need not have to buy from an agent.
2. “Sir somebody will have to co-ordinate regarding the paper work – WHAT happens if you die, who will process your claim?”
Ans: Family members take care of claim processing.
3. “Sir in a term insurance you will GET BACK NOTHING! all your money is wasted, please buy a ULIP – it is a great combination of investment AND life insurance.”
Ans: premium is a cost for getting protection to family hence should not be considered as waste. Cost in ULIP is super high hence to maximize benefit, buy term insurance and invest in mutual fund.
4. “Sir we have a product which is a combination of investment and life insurance and sir IT IT NOT A ULIP!!”
Ans: It must be ULIP
5. “Sir we have an even better product – called ‘Term insurance WITH return of premium’ – much better than a term which does not give back your premium!!”
Ans: Any insurance product that gives back money is a bad product.
Vishal
Great post Subra. Below is why I think these statements are against me. I am sure you have given this advice to your readers before already.
1. Sir life insurance is a complicated product, please buy it through an agent.
Life insurance (Term insurance) is not a complicated product. If I buy it through an agent, it is going to be more expensive. Moreover, the agent will try to dissuade me from buying a term plan, and try to sell a ulip or endowment, which is definitely against me but in favour of both the life insurance company and the agent himself.
2. Sir somebody will have to co-ordinate regarding the paper work – WHAT happens if you die, who will process your claim?
Oh please, most of the time the agent is anyway not around when the need for a claim arises. You don’t need an agent to file a claim, you can do it directly with the insurance company.
3. Sir in a term insurance you will GET BACK NOTHING! all your money is wasted, please buy a ULIP – it is a great combination of investment AND life insurance.
You should understand two things. First, that life insurance money is never returned, only you don’t seem to know. Even in a ulip, there is a portion of your premium that goes towards life cover, and that is a pure expense. What you get back, is only that portion of your premium, which gets invested and grows. The second thing I want you to understand is that costs are very high in ULIPS as compared to mutual funds. So it is better to go for a term plan plus mutual fund combination, rather than a ulip.
4. Sir we have a product which is a combination of investment and life insurance and sir IT IT NOT A ULIP!!
Then it is an endownment plan, which is even worse.
5. Sir we have an even better product – called ‘Term insurance WITH return of premium’ – much better than a term which does not give back your premium!!
Who are you kidding !! This plan got to be more expensive than a pure term plan, and again you can internally divide your premium into two parts – one that pays for your life cover, and the other that comes back to you after several years and obviously it grows a little, and you think you got back your premium without taking into account the time value of money.
Sagar Chaudhary
Very Nice post Subra sir….
Rohan
Subra sir,
Private Life insurance cos have now discontinued providing for Accidental permanent Diasbility alongwith term plans. How very convenient of them!
Khushnood Viccaji
In spite of all these clear negatives, many people still buy insurance from agents, still buy ULIPs, and are still afraid to file insurance claims on their own !
Thanks to Subra’s blog, I have learnt to say “NO” (politely, yet firmly) to my bank’s relationship manager, since the past couple of years 🙂
He doesn’t like it, but can’t do much about it.
subra
there is not enough HONEST statistics to say LIC is better at claim settlement. Comparing LIC to new companies is like comparing Sachin’s batting record to Shikar Dhawans. Shikhar has a batting average of 100 and Sachin ONLY 53.
So do not use statistics to prove anything.
Pure classic endowment is more expensive than ULIP. lol.
Accidental permanent Disability is so difficult to prove and make a claim that you may be better off if the product does not exist. See how many claims they PAID in the past 5 years.
thanks Kushnood, Sagar and the others too 🙂
Harish Nagpal
You appear biased becasue of advertisement by HDFC online. There are offline term plans by companies which are much cheaper and better claim ratio.
Saurav
My understanding is that for taking benefits of MWPA acts and EMPLOYEE EMPLOYER benefits one has to get in touch with advisors only….
So still Insurance industry has future…. they need to sell the same on the basis of clients need… not on the basis of their need.
shaq
Subra sir,
i knowingly bought from LIC even though i researched online and found the prices competitive.I decided to go with LIC due to various factors like location. ( my family lives in a small town), etc.
I was lucky enough to find a LIC agent who was very transparent with his dealings and once i was clear that i wanted only a term insurance he did the needful.(making my life easier with proper documentation) this agent also came in handy as i had some issues while making the premium couple of year ago.
In the end its about doing your due diligence and making an informed decision about what suits your need and lifestyle
Bhuvan
Hi Subra,
You are right. In the life insurance policies you will get hardly 5-6% annual returns even though you invest for very long term and the insurance cover is also very meagre compared to term insurance.
http://usualinfo.com/why-term-insurance-is-best-compared-to-traditional-insurance/