Finance

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

Posted Vinaya HS

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.

12 thoughts on “Seven Money Resolutions for 2011:
#3 — Purchasing Life Insurance: Think BIG; Start small”

  1. Yes, you’re right.
    There are plenty of cheap Term Plans available online now. I would recommend you either of the three:
    1) Aegon Religare iTerm Plan
    2) ICICI iProtect
    3) Kotak e-Term

    All the above plans are valid. But, the questions is we do not know if the insurance will be paying the amount on the death of the individual.

  2. @Anil:

    True. Especially after reading these statistics.

    My guess is that the higher the amount of insurance cover the lesser is the probability of your dependents seeing a payout. Example: The chances of receiving a Rs 10 lac payout would be much higher than the chances of receiving a Rs 1 crore payout.

  9. Hey Vinaya. Thanks for your article. Just this year in 2012, I purchased a LIC policy (50k per year). Now as I understand to surrender the policy and get any money from LIC, I have to pay 1lakh more (50k each for the next 2 years). Would you suggest me to continue paying it for the next 2 years or just leave it with the first 50k itself. How much will i get after paying 1.5 lakhs for 3 years. Any suggestions?

  10. Hi Vinaya,
    I accidentally came across your blog today. Went through couple of your articles, its making me only curious to go through the entire blog, which I will eventually. :)
    I have plans of buying a term insurance for past 2 years and could not zero on one. I have given myself time till october end, so wanted to know if you bought a term insurance. If yes, which one?
    Thanks & Regards

  11. Hi Ajay,
    I am also a regular reader of the blog. Vinaya has created this page : http://bit.ly/termplans where he regularly reviews the term plans available. Of the plans so far he has reviewed, AEGON Religare iTerm Online Term Plan is the top ranker.
    In fact, this plan AEGON Religare iTerm Online Term Plan has also been ranked one of the best in ET Wealth weekly edition too.

    Hi Murali,
    In my opinion, you could just forget about the amount paid. You can have a look at the different posts on Jeevan Anand or LIC policies and calculate to check how much you get. While calculation, ensure that you keep the point “Time Value of Money” for the right calculation.

    Anil

  12. Dear,
    I want to surrender/stop my lic, jeevan saral policy before 3 years. What options do I have to recover my money. Like taking loan against it and not repaying them etc!!!!??

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