An Update to My Seven Money Resolutions for 2011:
#3 — Purchasing Life Insurance: Think BIG; Start small

by Vinaya HS on December 27, 2011

in Finance

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Towards the end of 2010, I made Seven Money Resolutions for 2011 that I hoped to execute upon through the year in order to strengthen my personal finances. A year has almost passed and I thought I’d provide an update on each of these resolutions.

Resolution #3:
I will buy term life insurance online. Because I’ve only had terrible experiences with life insurance agents and medical diagnostics laboratories, I will purchase a simple term policy online. I will also ignore all those complex financial models that tell me that I need to insure myself for crores of rupees out of the box (heh!). I will think BIG but start small.

My (mis)adventures in trying to buy term life insurance are legend to regular readers of this blog. From agents who suddenly go missing, to direct marketers who blatantly ask you to lie on the application form, to totally clueless medical diagnostics centers (ironically called Clumax), to insurers who force you to surrender a defunct endowment policy prior to applying for a term policy, I have seen it all.

I’ve also grown tired of those life insurance calculators whose “artificial intelligence” output tells you to insure yourself for crores of rupees. When you can’t buy a term policy for even a rupee, dreaming about insuring yourself for crores of rupees is quite sadistic.

Hence, in 2011, my strategy to buy term life insurance is:

  • No life insurance agents. No direct marketers. No diagnostic labs. Online and faceless is my only option left.

  • Research term policies that I can buy online (only a handful as far as I know). Sum assured will be a [relatively] small but decent amount and for the longest tenure available.

  • Surrender my now long defunct LIC Jeevan Anand endowment policy. Use the proceeds for paying the initial premium on the term policy.

  • [Assuming that I get the policy,] Wait for six months and double my coverage through a second term policy. (And if luck is on my side, repeat this strategy in 2012 — possibly through a different insurer).

Think BIG. Start small. Be faceless. That’s my strategy.

What do you think?

Note: If an emergency fund, health insurance, and zero-debt together form the core of your personal finances, disability or personal accident insurance constitutes the layer on top of the core, with life insurance when you have dependents forming the third layer.

Update: Again, I did absolutely nothing through the year. So many of you wrote-in (through comments, emails, and personal interactions) asking me to evaluate online term-insurance providers that it should have hustled me into taking action or at the very least be prepared with my research. But for one reason or the other I never got around to doing this and I apologize for that. Not having insurance when you need it and you can afford it is indeed a no-no. I promise to get around to completing this in January, 2012.

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.

{ 1 comment… read it below or add one }

JoeKidd February 5, 2012 at 7:24 AM

4 years back I got myself a term policy from icici-pru-life.
I stuck to it for 2 years and then saw a policy from Kotak which for a slightly higher premium gave me double the coverage.
I switched and stuck for another 2 years.
This year I noticed that Aviva Life gives me again double my coverage for the same premium, so I am discontinuing the existing one and moving to a new insurer.

I guess we should not make the decision making too complex.

Unlike endowment or money back policies, it becomes quite easy to switch, since we do not need to bother about bonus/surrender value etc.

Just go do it!

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