Ganesh is a 30 year old engineer working in a manufacturing company. Ganesh’s family includes his wife (homemaker), a 5 year old daughter (Komal) and retired parents.
- Ganesh has a 20 year home loan of Rs. 25 lakhs which he is servicing since the last 2 years.
- He has a 5 years car loan of Rs. 7 lakhs which he took last year.
- Ganesh is investing Rs. 5000 per month for his daughter Komal’s education and another Rs. 5000 per month for her marriage. Ganesh started these investments 3 years back. Ganesh wishes to make Komal a successful engineer just like him.
- Ganesh enjoys an annual vacation with family for which he pays from his credit card.
- Ganesh doesn’t believe much in insurance, although he has bought an endowment plan which covers him for Rs. 5 lakhs. He bought this plan only with the intention of saving income tax.
Ganesh is a perfect example of rising middle class of ‘Shining India’. Ganesh enjoys life to fullest and he doesn’t have much savings. So far life has been very good for Ganesh, until life gave him this nasty shock.
Sometimes life can be cruel
Ganesh had promised his daughter Komal that this time he will take her to Kashmir for an annual vacation. Komal is thrilled by the fact that she will get to see and play in snow for the first time in her life, which so far she has seen only in movies. Komal is eagerly waiting for her dad to return from the business trip from Chennai after which they plan to proceed with their annual vacation to Kashmir. Little Komal did not know that her dad will never come. The only thing that came was the tragic news of her dad’s death in a plane crash. The family is in a shock and disbelief. The news of Ganesh’s death has not even sunk in. The tears of the family have not even dried and along with relatives who have come to express grief and condolences, the family has unexpected visitors knocking on their doors. These unexpected visitors are none other than the recovery agents:
- First its the credit card recovery agents who are demanding their outstanding dues to be cleared at the earliest.
- Then the finance company agents repossessed the car and disposed it off in the market to recover their outstanding car loan amount
- Then the bank officials are demanding their home loan EMI’s threatening that they will seize the house if the EMI’s are not paid on time. Where does the family go if the home loan EMI’s are not paid on time and the bank takes the possession of the house???
- Komal’s plans of pursuing engineering when she grows up have crashed!!! Who pays for her education???
- Komal’s marriage plans are in a limbo!!! The investments that Ganesh was making for Komal’s education and marriage have come to an abrupt halt.
- There is a big question mark on the family’s survival itself. The 5 lakhs insurance cover that Ganesh had taken can barely take care of the family’s needs for the next 1-2 years. What after that??? How does the family survive???
Importance of Insurance
Everything was good and going well till the unexpected and untimely death of Ganesh. So where and how did Ganesh get his planning wrong??? Ganesh did not have adequate insurance cover to take care of his liabilities and responsibilities in his absence. Had Ganesh taken appropriate life insurance cover to take care of his liabilities (credit card dues, car loan, home loan) and his responsibilities (Komal’s education and marriage expenses and the family’s survival expenses) in his absence, then today his family’s survival would not have been in question. Insurance premium that we pay for adequate protection of our liabilities and responsibilities is the small price we pay for the well being of our family in our absence.
Online Term Insurance Plans
Since the last couple of years some insurance companies have come up with online term insurance plans. In terms of features, these online plans are no different from the term insurance plans that can be bought from agents. But the major difference is in the way they can be bought and their pricing. These plans as the name suggest can be bought online only through the internet (from the company’s website). Since there are no agents involved and the administrative costs for these plans are less, the premium for these plans is less by 30% – 50% as compared to other term plans that can be bought through agents. The premium payment for these plans can be made through credit cards or internet banking.
Comparison of Term Insurance Plans
Let us compare the premium and features of some of these online term insurance plans
|Company Name||Kotak Life Insurance||ICICI Prudential||Metlife||Aegon Religare||Aviva||IndiaFirst|
|Term Plan Name||e-Preferred Term||iProtect||MetProtect||iTerm||i-Life||Anytime Plan|
|Premium for a 30 year old person for a cover of Rs. 50 Lakhs for 20 Years|
|Premium||Rs. 5487.43||Rs. 5791||Rs. 5294||Rs. 5736||Rs. 4893||Rs. 6162|
|Minimum Sum Assured||Rs. 25 Lakhs||10 Lakhs||25 Lakhs||10 Lakhs||25 Lakhs||10 Lakhs|
|Maximum Tenure||30 Years||30 Years||35 Years||25 Years||35 Years||30 Years|
|Claim Settlement Ratio for 2009-10||86.97||90.17||82.54||48||87.11||53.85|
Please note: All the premiums are inclusive of taxes and have been taken from the respective company websites. All the premiums are as on 29th May 2011.
Claim Settlement Ratio is the number of claims settled by the insurance company for every 100 claims received by it.
Features of online term plans
We can see from the above table, every company plan as its own features which acts as its USP.
- I-Life from Aviva has the lowest premium and the maximum tenure of 35 years.
- Even MetProtect has a maximum tenure of 35 years which is higher than the tenure of plans offered by Kotak, ICICI Prudential and Aegon Religare.
- Kotak offers the buyer to increase (step-up option) the cover in the middle of the plan tenure during important events like marriage, child birth, buying a house.
- ICICI Prudential has the 3rd best claim settlement ratio in the industry at 90.17 after market leader LIC (96.54) and HDFC Standard (91.14). Aegon Religare has a low claim settlement ratio at 48% being a relatively new player compared to other players in the industry. Claim settlement ratio is one of the important points to be considered at time of buying an insurance plan.
- IndiaFirst Life Insurance Company’s premium for ‘Anytime’ plan is the highest at Rs. 6162 and also the maximum cover that can be offered under this plan is restricted to Rs. 49 Lakhs. IndiaFirst Life Insurance is a joint venture between PSU Banks – Bank of Baroda and Andhra Bank and the third partner is ‘Legal & General’ of UK.
Thus we can see that people like Ganesh can avail an insurance cover of Rs. 50 lakhs for a small premium of Rs. 4500 – Rs. 5500 per annum to protect their families from any uncertain events. An annual premium of Rs. 4800 amounts to Rs. 400 per month or less than Rs. 15 per day which people spend on having 2-3 cups of tea everyday. Yes insurance cover of Rs. 50 lakhs is cheap as the amount that you spend on tea everyday. So are you willing to spend that amount to protect your family against any unexpected event that may happen to you???? Well think about it!!!
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