We generally avoid buying financial products because of their complexity .For a layman it is hard to decipher the real cost benefit analysis by understanding the feature offered under a plan. In an attempt to buy one because we need we end up making some wrong and hasty decision and which lead to long term bad effect on your financial plan. A similar scenario happens in case of life insurance too. We end up buying life insurance plans for minor objectives like tax savings and others and mess up our financial plan/
So you can avoid doing mistakes which people generally make you look at things at broader angle or otherwise you end up wasting your hard earned money. Few of the common mistakes which people making while buying life insurance are
I am very young so I don’t need a life insurance, this is a common error which most make of the people make. We should understand that life insurance is meant for giving financial not to the person who is buying the policy but to his/her dependent. You might be young and just started your career but while buying a life insurance policy you should always look at the underlying financial responsibility. You might need money to support your parents or might need money to support your siblings to do further education. In case if you are not there then who will take care of your financial responsibility. So it is not the age which is important but the value of your financial liability is important .Another important thing is that the young you buy the lesser amount of money you pay for it.
Treating insurance as investment. Though there are variants of life insurance plans like Endowment and ULIPs which have an investment feature and which might also attract you because of the twin benefits but one should know that nothing comes free. In fact if you check the extra cost involved you might find bit costly compared to regular investment option like mutual fund plus you also need to pay the extra cost insurance too. So please don’t get confused while buying a life insurance plan , be very clear with your objectives why you are buying one.
Exiting policy at the wrong time. We should know that insurance plans are designed in a way so that you can actually draw benefits out of it only when you complete the total period of the contract. The charges of early exit are always very high. A very early exit might even lead to zero money coming back to you as the surrender value would be completely eaten away by the charges. So while buying life insurance you should be clear with your objective of protection and the period which you have give before can actually reap the benefits.
Buying too many policies. This is a very common mistake which people make. Every Life insurance policy you buy there is a cost involved. You agent might push you to buy large number of policy lured by an extra incentive which the insurance company might be giving him but don’t get taken away by that. You should always look one life insurance policy and which should have the flexibility of adjusting it as your needs and stages of life in future.
Cheapest one the best. This is common mistake which people while buying term insurance plans online. You should keep in mind while analyzing a life insurance policy that cheaper should not mean less in feature. While buying online term plans people get taken away by cheaper premium but before buying you should always compare it with the offline version and do a just analysis based upon the feature it has to offer
Divorce has become a common phenomenon in modern urban households today. There has been an alarming rise of divorce cases in cities like Delhi, Mumbai and Bengaluru. As per data in 2005 Delhi had 5 judges to handle to divorce cases but when you see today’s number it has gone up to a number of 20. When we compare the same in parlance with West there is phenomenon of laying down rules to be followed post divorce during the time of marriage but when we consider India things are quite different. Most Indians consider marriages as a holy affair so the concept of laying rules before hand is always ignored but in case of a divorce like situation or any similar situation which is either unforeseen or even planned can lead to lot of turmoil in the financial plan of any person.
Though divorce has a lot of emotional baggage associated with it but it should muddle with the financial affair of any person. Any wrong decision can lead to a long term effects on the financial health of any person. A right mapping of assets (which involves financial assets like term insurance plans, investment plans etc or other form of assets like real estate) where the couples are connected in joint relationship or an owner nominee relationship should be done with proper planning so prevent post divorce massacres.
From the perspective of insurance which might involve nominee or assignee relationship or investment related insurance plans should be looked in the perspective as given below
How to handle nominations? In case the nomine in your existing term policy is your wife or husband then try to remove her or him before the legal settlement of the divorce agreement and re-nominate somebody new with whom you have a blood relationship and make sure that new nominee has direct insurable interest from you. Insurable interest means that in case of death of the proposer of the term plan the new nominee has direct economic loss.
Insurance companies always need legal nominations to settle claims but in case the nomination is not settled at the time of divorce then can create unnecessary hassle.
How to handle assignment? In case the nominee in your term policy is somebody who is minor and your spouse holds the assignee rights then again things like this can create trouble post divorce. As an assignee the person enjoys whole rights and liabilities in your plan so you should carefully re-assign a new person before the divorce settlement complete. The reassignment need to done way before the divorce settlement because for any change in the nominee or assignee in your term insurance agreement you always need the assignee’s agreement so get away from this hassle this is the obvious right approach.
So it is always advised in case of term insurance or any other form of insurance whatsoever so you should always handle case of emotional turmoil like divorce in the most planned way or otherwise it can lead financial mismanagement also leading to unmanaged finances for long period of term.
Few features in your insurance plan might look very attractive from the frontend but when you try to evaluate the right nuances based upon numbers things may turn quite different. Similar rules apply to some new options launched by many insurance providers with their term insurance offerings. One of the many options is the staggered payment option which insurance companies have started offering in last few years. When you consider a regular term plan, in case of death of the policyholder the nominee get the total sum assured as claim in one go but when you can consider term insurance plans with staggered option the sum assured is not paid to nominee at one go rather it is divided into number of installments over a period of years. In case of staggered options also there are two sub options one with monthly payments for a period of years and other differential monthly payments. Let’s understand by a case
Lump sum assured one time payout
Payout in case of Staggered option
Plan A-Bought at the age of 30 , who is a non smoker and has policy term of 30 years
Rs.83,333 per month for the next 10 years
Average Premium paid: Rs.10,000 in case of Lump sum payout
Income plus option
Rs.83,333 per month for the 1st year and then increase by 10% annually calculated on simple interest
From the simplification perspective the staggered option might look a better option because if you family members are not so financially literate then they can’t take the benefits of the lump sum payout by investing the amount of get better returns. In a case like this the staggered format can work better for them so that at least the policy can take care of the family’s monthly expenses.
Read Related Article: Birla Sun Life Online Term Insurance: Birla Sun Life Easy Protect
On the other hand if you feel your family is smart enough to handle lump sum payout then we should evaluate the option based upon the internal rate of return of the any of the option selected. If you follow the IRR mechanism to evaluate the plan you will find the staggered is not much attractive to look into. As in case of staggered plans the average IRR offered by any of the online term insurance plans is less than 7% and which is like post tax returns of regular fixed deposits which is makes it more unattractive to invest.
So while buy online term insurance plans with any of the options we should try and understand the nuances based on the criteria mentioned above. Though form the security reason the staggered option might look effective for the family to handle the money easily. They don’t need to worry about investing the money further to take care of their regular financial needs. The Staggered option though provides your nominee with much easier planned approach and you don’t need to worry about how things would be taken care after your death but from the returns perspective it quite not acceptable. A lower returns of less than 7% is not at all attractive and it will not to beat the inflation cost in future. The best advise in this case is understand your requirement by looking into the nuances of each option more effectively so that when you are not there yours family’s financial health is taken care of in the best possible way
Joint Term Insurance Plans: A Better Option For Working Couples
Nuclear families and working couples is now the new phenomenon in most of the Indian metros today. In traditional patriarchal Indian families where the male member used to be only bread earner in the family and the rest of the family used to depend on him the insurance needs where quite different. Even if we want to look at it specifically from the term insurance perspective the planning one used to follow was also quite different.
The need for joint working couples involved in the Indian cities is mainly because of rising cost of living and education of children and also because of rising aspirations for better life. This lead to the concept of insurers offering joint term insurance plans. Previously term plans where mainly meant for individuals but with the change in context the concept of joint term plans have started evolving. In the context of joint term plans there two types of options which are now available today, which are:
The key benefits to look into are:
Though the joint plans have their own benefits when compared to individual plans but while buying one you should properly evaluate the requirement as you would have considered in case of individual plans for each member. Other than that one should also consider factors like sum assured amount, premium, additional benefits, the policy term, surrender values and claim settlement ratio of the insurer before selecting any specific plan. As in case of individual term plan, joint plans also have their online versions which are always cheaper than their offline alternatives so once you decide upon your plan you should try using online platform of buy one. The online platforms like myinsurancebazaar.com can also help you do a fair comparison between two different plans in a much better way.
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My Insurance Bazaar: The Need Joint Term Insurance Plans online in India because working couples is now the new phenomenon in most of the Indian metros today In traditional patriarchal Indian families
With the changing dynamics how insurance is viewed as a financial product and proliferation of large number of insurance comparison websites like myinsurancebazaar.com Insurance companies are now forced to offer a different set of products for this new age customer. Birla Sun life Easy Protect product is a term insurance product which is specifically made for people buying term plans online. As in case of all online term Insurance plans, the Birla sun life policy is quite different from its offline peers which you can only buy offline agents and advisors .On the other hand the premiums are also quite cheaper for this online plan because of the reasons like
Key features of Birla sun life online term plan:
You can apply for two forms of option under this policy depending on the need. Under option 1 you can apply for a sum assured which will remain stable during the period of policy whereas option 2 provides for option where the policy holders can increase the cover under the policy every year. The various options offered are called:
Birla Sun life online term policy is an apt insurance policy for people specifically looking for term insurance plan. Other than the unique sum assured options available to the policy holder it also offer tax benefits under section 80 C on the premium that you pay every year.
HDFC Click2 Protect is a unique online term insurance policy from HDFC Life Insurance Company. In terms of its uniqueness which this particular policy offers is the Life stage feature. This is add on feature which available to any policy holder who has opted for a Life option in the policy with all the other benefits which most of the online term insurance plans provide.
What is a Life stage cover?
Life stage cover is an extra cover which any existing policy holder with Life option can opt for without getting into the hassles of getting a medical test and other problems which people have face when while buying a higher cover to suite current needs.
Seems bit confusing ……let us explain you more
When we plan for our finance we generally consider the current financial status to decide upon our financial goals, the idea is good it can have lot of other hassles. If we don’t review this plan every year keeping into consideration the rising cost of living and our financial position you might end up creating a mess and money that you might have saved for certain goals might not be enough to meet at a future date. The same rule applies to your insurance planning too. As we pass through different stages of life you need to insurance cover increase because of rising financial liability .In a situation like this if you buy new term insurance policy online you might end paying not only more but also the hassles are many. Life stage protection is a feature where you can increase your insurance cover in the existing policy without getting into other hassles.
See the below table to under:
|Events of life||
Additional Sum assured you can opt
( As a percentage of existing)
|Birth of 1st child||25% increase|
|Birth of 2nd child||25% increase|
Other features of the policy:
|Life Option||Death Benefit|
|Extra life option||Death Benefit + Accidental Death Benefit|
|Income option||Part of the Death benefit as a Lump sum with the remaining payable in form ofMonthly income over a period of 15 years.|
|Income plus option||100% of Sum Assured is paid on death and a monthly income equal to 0.5% of Sum Assured becomes payable for a period of 10 years. The monthly income can be level or increasing at 10% p.a. as chosen by the policyholder|
Death benefit: As term insurance policies are always meant for helping you family when you are not there so features associated with death benefit become very pertinent part of any policy. It decides what your family would get as financial help when you are not there to take care of things.
The benefit under HDFC Click2protect depend on the type of premium paying option that you selected.
|Single Premium policies||Other than Single premium|
Highest of the below :
HDFC click2protect unique value in the online term insurance space make it effective for all types of financial needs but it is always advised to do a online comparison before you jump into decision. You can use the myinsurancebazaar.com Term Insurance premium calculator to make effective financial decisions.