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When it comes to buying term life insurance, most discussions that I have had with friends and readers and that I have read online lead to a single question: “Can I really trust the insurance company to honor its commitment at the time of payout given that quite a bunch of them have a high claims rejection ratio?”
At the same time, most want to play it safe and stick with LIC given its sovereign guarantee (which, in my opinion and given the the state of world finance in general, isn’t something that you can honestly count upon).
A safe way out then would be to spread your “risk of trust.”
Suppose you’re looking for a cover of Rs 1 crore through term life insurance. Buy coverage of Rs 50 lacs from the insurer that you trust most and coverage of Rs 25 lacs each from two other insurers who you trust to a lesser extent. You get the same cover in total but you’ve also mitigated the risk to an extent.
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.