Broadly speaking, insurance is of two types. Life and Term. As the names suggest, Life insurance is a policy taken for life and Term insurance is for a stipulated period of time. Both have their pros and cons, and depending on the company that one is buying the product from, the onus may vary from one to the other. There are a few simple, but vital questions that one needs to ask oneself, before handing over the cheque with the premium amount to an insurance executive.
‘Why Do I Need Term Insurance?’
This is the main question that needs to be asked. Gone are the days when the only insurance agency in the country was the Life Insurance Corporation of India. For over a decade now, private insurance companies have entered the fray and the number of products offered are numerous. In this day and age, certain term insurance products are also capable of taking care of one’s investment or saving needs and can cover most of one’s financial needs and debt. But typically, term insurance is chosen or risk cover. In other words, term insurance products are typically protection policies. Ideally, one must seek to protect one’s loved ones and family, before considering investment. Choosing a term insurance policy that would pay an agreed sum to the family in case of death of the policy holder or a particular event, is an ideal decision.
‘Have I done My Homework?’
Before speaking to an insurance agent, it is better to prepare oneself by doing some research on the products available in different insurance companies that match the individual’s needs to some extent. Only after thorough research can one solicit an insurance agent. In the absence of research, it is usually impossible to distinguish an intelligent, yet unprofitable spiel from genuinely good advice. For example, while most insurance agents may have the customers’ welfare in mind, their loyalty will lie with the company, and therefore, they will try to sell a Life Policy, instead of a term policy, since a life policy more profitable for the company. The one word pitch for Life insurance would usually be ‘Savings’, but this is also what makes the policy much more expensive. It would be more prudent to pay the lower premiums for term insurance and use the saved difference to invest elsewhere. But to know this, one needs to do some basic research.
‘One or Two?’
This question applies both to the number of policies and the number of insurance agents to meet from each company that one wishes to solicit. The answer to both, must be at least two. As far as meeting insurance agents is concerned, it is always better to meet more than one representative from each company, allowing for a comparison of the pros and cons.
With regard to the number of policies, if one wishes to seek cover a large amount, say Rs. 50,00,000, then it is better to split the amount into two policies in different companies, to reduce unforeseen risk of nil returns.
And finally, one must start early, i.e., take the policy as early in life as possible, at the peak of health, for long periods (ideally 30 years), to enable lower premiums.
‘Why Do I Need Term Insurance?’
This is the main question that needs to be asked. Gone are the days when the only insurance agency in the country was the Life Insurance Corporation of India. For over a decade now, private insurance companies have entered the fray and the number of products offered are numerous. In this day and age, certain term insurance products are also capable of taking care of one’s investment or saving needs and can cover most of one’s financial needs and debt. But typically, term insurance is chosen or risk cover. In other words, term insurance products are typically protection policies. Ideally, one must seek to protect one’s loved ones and family, before considering investment. Choosing a term insurance policy that would pay an agreed sum to the family in case of death of the policy holder or a particular event, is an ideal decision.
‘Have I done My Homework?’
Before speaking to an insurance agent, it is better to prepare oneself by doing some research on the products available in different insurance companies that match the individual’s needs to some extent. Only after thorough research can one solicit an insurance agent. In the absence of research, it is usually impossible to distinguish an intelligent, yet unprofitable spiel from genuinely good advice. For example, while most insurance agents may have the customers’ welfare in mind, their loyalty will lie with the company, and therefore, they will try to sell a Life Policy, instead of a term policy, since a life policy more profitable for the company. The one word pitch for Life insurance would usually be ‘Savings’, but this is also what makes the policy much more expensive. It would be more prudent to pay the lower premiums for term insurance and use the saved difference to invest elsewhere. But to know this, one needs to do some basic research.
‘One or Two?’
This question applies both to the number of policies and the number of insurance agents to meet from each company that one wishes to solicit. The answer to both, must be at least two. As far as meeting insurance agents is concerned, it is always better to meet more than one representative from each company, allowing for a comparison of the pros and cons.
With regard to the number of policies, if one wishes to seek cover a large amount, say Rs. 50,00,000, then it is better to split the amount into two policies in different companies, to reduce unforeseen risk of nil returns.
And finally, one must start early, i.e., take the policy as early in life as possible, at the peak of health, for long periods (ideally 30 years), to enable lower premiums.