Are Indians over insured?
Are you surprised at this title? Has the Insurance industry not been telling you that Indians are under insured?
I met one person last week – a lady who had taken VRS. She was not planning to take up a job again and it was the end of her working life. She was under 40 years of age and her life insurance was in …well a mess.
She knew her policies in terms of premia per month, per quarter, or per annum. No clue why she had any of those policies. She was earning about Rs. 30L and thus had tremendous premium paying potential. She has a husband earning about Rs. 1.4 crores. Her parents or siblings do not need her money for sure.
So technically she had no dependents. She was paying a premium of Rs. 5L per annum with a plethora of policies. Her sum assured was a princely Rs. 50L. Even had a moneyback policy meant to fund her son’s education when he turned 19! He was not about 11 years of age.
Met another person – another lady – who was so terribly over insured with TERM INSURANCE itself, that to me it looked burdensome – and far more importantly unnecessary.
If you are a woman earning Rs. 15L and aged 40, how much term insurance do you need? Forget all thumb rules, about Rs. 1 crore is enough. And till what age should one have TERM INSURANCE? till your age at which you will retire. We are all fooling ourselves believing 60 years to be the retirement age. In this country of youngsters, people will be lucky to keep their jobs beyond the age of 55 years.
So she needs a Rs. 1 crore TERM INSURANCE, from the CHEAPEST PROVIDER, BOUGHT ONLINE.
Well that is what she NEEDS. Only problem is that people buy what the RM sells (term insurance) with extra loading (hey bank has to make money) for an amount which the RM proposes. So it becomes a Rs. 2.5 crore insurance, till age 75 (maam it is available till 75, not like other insurance companies).
SO WHAT you can ask, Right? Well she is over paying for an over insurance for an excessive period of time. And worse, at a higher rate. Tch tch….so what?
Hmmm…i wish I could sell a ‘Wild Animal killing you’ insurance. Value Rs. 1 crore. Premium Rs. 750.
Brilliant deal no? Valid for 1 year….want it?
vatsa
I really want to see the faces of the financial planners, bloggers and the dependants of those “smart people” who took 1 Cr term insurance online when their claim gets rejected.
bharat shah
i am really wondering there are people earning so much so innocent,so ignorant in personal finance!
Rajiv Ahuja
@ Bharat Shah – People,lawyers doctors etc are very much financial illiterate.Even I am.But trying to lessen the gap. Thanks to Subramoney.Just imagine ,if this is the case of financial illiteracy in metro;the state of affairs in non metros.
Sunil
@Vatsa, what is the problem in taking a 1 crore policy and why do you think such a policy would be rejected, just because it is 1 crore?
Wouldn’t he have all the facts displayed during applying…
I have many people who are having 1 cr Term insurance , so you mean all of their claims gets rejected?????
Karthikraja
Online Term Insurance:
Subraji explained very well in previous post.
More you honest will filling the form, lesser the claim settlement risk. Based on our application, Underwriters flags for medical check and change in premium.
We should educate our nominee about claim settlement form, what is the hotline number, documents required and our original policy document and important email communications relevant to that.
It helps during bad times…
Abhi
Subra,
I need to meet you, clearly people who live in your circle make a lot of money. Probably something would rub off to me as well 😉
vatsa
@Sunil:
“..Wouldn’t he have all the facts displayed during applying..”
Doesn’t matter what you did while applying it is what your dependents do when you are not there when they file for the claim !(unlesss you are planning for a fraud :P).
+1 for karthikraja’s comments
2. why do you think such a policy would be rejected, just because it is 1 crore? I have many people who are having 1 cr Term insurance , so you mean all of their claims gets rejected?????
Predominantly Yes.
— Claim settlement ratio is a misleading statistic. Take LIC has 99% for eg .
It has policies issued and claim settled from 10k to 1Cr.
It can sanction 99 policies of 1 lakh and reject YOUR 1 Cr. It would still have 99% settlement ratio, saved 1 lakh in the process!
— Not even IRDA releases (nor we can file a RTI) the number of claims filed and settled that were above 50 lakhs limit for all the insurance players. Go figure! Most of them are foreign players by definition to boot!.
— All of your friends doing it and many people doing the same thing is not a guarantee YOUR claim will be accepted.
subra
I do not know Vatsa’s age nor do I know for sure that he is an agent of insurance. There is a huge gang out there (including the manufacturer and the agent -remember the commission comes out of the premium not from the PnL of the Insurance company) which does not want you to buy term insurance , and even if you want to NOT ONLINE. Look at the pricing and you will know what I mean. This calls for a different post.
subra
read this along with Vatsa’s comments
http://www.subramoney.com/2012/10/buy-term-insurance-online/
Sunil
To be frank Subra, YES…. when one of my friend decided to go for Birla term Insurance, which is having the lowest Premium for Smokers…. he was really baffled by meeting this 1 guy from Insurance (obviously agent) and at the end he dropped the Term Insurance plan and bought Endowment from the same agent for triple the premium with not even 1/3rd the insurance.
He now regrets why he went for the plan, which hardly gets him 5% if he continuously pours his money into this ENDOWMENT WELL for 15 years.
Who won here????
Regards,
Sunil.
subra
Who won? Sunil why are u asking me that question? obviously the agent won, and your friend got conned. Brilliant salesman I should say. Or, an obviously easy to con guy – this friend of yours!
vatsa
Q: Are Indians over insured?
A1: Yes. Indians are “unnecessarily” insured (ULIPS,endowment,child plan, education plan, moneyback plan, moneyfront plan, guaranteed plans)
A2: Yes. Those who buy term plans are over insured (Cheap 1Cr online has a big glamour)
A2a: Life insurance should be expense replacement and not income replacement. 1Cr is arrived mainly through income calculations.
@Subra: (take in lighter vein)
Most of these online 1Cr policy holders are never worth 1 Cr. They are worth more dead than alive!
With Indians being desperate and obsessed with money more than ever, it is easy for a dependant to pay a 1 lakh supari on that fellow’s head, bribe 2-3 people here and there for a lakh or two and pocket the 1Cr claim and ride off to a beach and sunset 🙂
vatsa
@Subra:
lol, i am not an agent.
if you look at some of my posts, I would have said any form of insurance is a scam.
Ankur Lakhia
@vatsa, I do not understand why do you think insurance companies would reject a claim, just because it is high value. Have you come across any such cases? If yes, it would be better if you share more details of such cases which could be eye opener for a person like me.
subra
hi value? Vatsa must be from some other planet if he thinks 1 crore is hi value.
dr m kishan
Subra Sir,
Really shocking to see this post at a time when I am shopping the net for topping up my and my wife’s term insurance. Is it sure that just 1 cr insurance is enough for a 15 lac female earner of 40 years? does that mean the formulae of being insured for 10 – 15 times the income plus liabilities, is all false? Please throw some light on this.
Vatsa’s comments will also have influence on the common public. If its real that policies with term insurance above Rs 1 Cr are generally dishonoured, then what the hell is insurance for. If Claim settlement ratio is all fraud then there is no means of selecting a good insurance company. We just have to depend on fate regarding claim honouring of the insurance policy. I think you are a better person to clarify the situation
Please DO answer these queries as many are dependant on the answers which you give. I think you will not be unjust to your social responsibility as a blogger 😉
Kishan
ab
1 crore is not a very large sum considering the fact the inflation of 5% on average is there. Insurance is done in form of financial back up and to provide security to family and kids. a 35 yr old buying 1 crore for 35 yr means if he dies at the age of say 60 yr the value is around 50-60 lac. and considering the fact that his kids esp in the present generation where u start late would be around mid 20’s may be trying for some kind of higher degree to boast the career would be in monetary crunch and same goes for whole of the family.
So either we should not have any insurance ( be self centered, which is hard with Indian mentality) or adequate insurance to curtail the risk taking.
Thats my piece of mind..kindly correct me if wrong.
ab
And i guess term plan is cheapest and probably the best
subra
Kishan,
read all my articles on term insurance. This female has nobody DEPENDENT on her..so she actually needs no insurance. In other articles I have said how much LIFE insurance to get.
I have no clue who is Vatsa, and 3 readers told me that I need to review my edit policy. What he says is pure unadulterated shit. I deal with life insurance companies, and have seen people take (hold your breath) life policies in 3 digit crores. The highest I have seen is Rs. 250 crores – and the premium included a re-insurer’s rebate. So relax. Online is just a mode of buying. It is like saying Parle biscuit bought online has more sugar than one bought in the shop. Read the comments and take the intelligent ones..ignore V kind of comments.