Life Insurance: Best Advise I have ever Read
I am damn sure you would have heard hundred stupid things about life insurance.
(1)
You should protect your family against your untimely death so that they dont face any hardship (it does not matter if you die. your family should be ok :)) just kidding but anyway thats the bottom line and I take it with a pinch of salt).
(2)
Endowment policy and Moneyback policy (always pushed by agents as they get heft commission) which one should you choose ?
(3)
Should you go for term insurance (which is rarely sold to naive people as commission is least)
(4)
Should you go for ULIP (as it provides exposure to equity !!!)
Now today I was going through rediff's following page:
http://www.rediff.com/getahead/2008/jul/17trans.htm
As a response to one question by one mmk, Sridhar Vetapalem (as claimed on the page to be a financial planning expert) probably gave the most compact and complete answer I would have expected from a financial planner. His answer summarizes what I believe and strongly feel about life insurance.
Please read below and
I quote
mmk asked, Sir, I am confused while choosing "Term Insurance". Can you please suggest the factors we should consider while choosing "Term Insurance" & also good term insurance options available in market?
Vetapalem Sridhar answers, Insurance is to cover risk (in financial terms only). Hence if a person dies and there r people dependant on him/her (in financial terms) then they will be put into financial discomfort. Hence the role of insurance should be limited to the extent of this financial discomfort. It is not an easy task to put a figure to this financial discomort. It would include all existing liabilities and future living cost of dependants (minus current assets, future earning potential of any other earning member). Hence when current assets exceeds the liabilities and future living cost of dependants then the need for insurance no longer remains. Evaluation also needs to be done whether a non working member of the family can take up work and earn if the need arises in this estimation. Hence in majority of cases Term insurance works out the cheapest soln to the above issue.During the period (generally 10-20 yrs) that the term cover is in operation the focus should be on creating a good amount of assets, thereby ensuring that the need for insurance no longer remains. SBI [Get Quote] Shield, Reliance [Get Quote] TERM plan, ICICI [Get Quote] Pru Lifeguard WROP r some gud options available....
unquote
So the article says:
(1) The Role of life Insurance should be to the extent of discomfort that is caused because of your death. Every individual should assess what discomfort your loss with have to your family and take a cover only to that extent.
(2) when current assets exceeds the liabilities and future living cost of dependants then the need for insurance no longer remains
If your earnings is such that it meets your current requirements and any possible future requirements, for gods sake don't buy an insurance policy.
(3) in majority of cases Term insurance works out the cheapest soln to the above issue.During the period (generally 10-20 yrs) that the term cover is in operation the focus should be on creating a good amount of assets, thereby ensuring that the need for insurance no longer remains
I completely agree with this point. When we start of initially our take home is less and if one is married and has kids with all non working people in the house, the onus is on the working person to cusion the family against the untimely death of the bread earner. So it beholds upon this bread earner to have some brains to take a term plan which will cusion him and use his brains to invest in other instruments so that after the term plan expires, the family is in a position to take care of itself as you have sizeable assets to tide over your untimely death.
Alright let me summarize all points and suggest what I feel about life insurance
(1) If you have hell lot of money. Insurance is not for you baby
(2) If you are married and have kids and have very less assets and your untimely death will cause severe distress to your family then you need insurance.
(3) If you are married and have kids and have okey dokey money then probably you can still go for insurance to get that extra cushion.
(4) If you are not married. I sincerely suggest dont bother about insurance man... your death will cause only emotional distress and nothing more and an insurance plan will definitely not help your near and dear ones to tide over the emotional trouma.
My suggession:
(1) if you need insurance go for TERM INSURANCE based on what is actually needed. Carefully decide how much insurance is needed. Dont blindly buy.
(2) For the sake of the Almighty please DONT buy a ULIP !!!! It is a pathetic way of looking at insurance. Insurance should be treated as an insurance NOT an investment. If you want to invest, invest the way you should by either buying stocks, corporate bonds, RBI bonds, Mutual Funds, currency, gold, art, real estate funds, gold funds, property.
Why ULIP ?
(1)
You should protect your family against your untimely death so that they dont face any hardship (it does not matter if you die. your family should be ok :)) just kidding but anyway thats the bottom line and I take it with a pinch of salt).
(2)
Endowment policy and Moneyback policy (always pushed by agents as they get heft commission) which one should you choose ?
(3)
Should you go for term insurance (which is rarely sold to naive people as commission is least)
(4)
Should you go for ULIP (as it provides exposure to equity !!!)
Now today I was going through rediff's following page:
http://www.rediff.com/getahead/2008/jul/17trans.htm
As a response to one question by one mmk, Sridhar Vetapalem (as claimed on the page to be a financial planning expert) probably gave the most compact and complete answer I would have expected from a financial planner. His answer summarizes what I believe and strongly feel about life insurance.
Please read below and
I quote
mmk asked, Sir, I am confused while choosing "Term Insurance". Can you please suggest the factors we should consider while choosing "Term Insurance" & also good term insurance options available in market?
Vetapalem Sridhar answers, Insurance is to cover risk (in financial terms only). Hence if a person dies and there r people dependant on him/her (in financial terms) then they will be put into financial discomfort. Hence the role of insurance should be limited to the extent of this financial discomfort. It is not an easy task to put a figure to this financial discomort. It would include all existing liabilities and future living cost of dependants (minus current assets, future earning potential of any other earning member). Hence when current assets exceeds the liabilities and future living cost of dependants then the need for insurance no longer remains. Evaluation also needs to be done whether a non working member of the family can take up work and earn if the need arises in this estimation. Hence in majority of cases Term insurance works out the cheapest soln to the above issue.During the period (generally 10-20 yrs) that the term cover is in operation the focus should be on creating a good amount of assets, thereby ensuring that the need for insurance no longer remains. SBI [Get Quote] Shield, Reliance [Get Quote] TERM plan, ICICI [Get Quote] Pru Lifeguard WROP r some gud options available....
unquote
So the article says:
(1) The Role of life Insurance should be to the extent of discomfort that is caused because of your death. Every individual should assess what discomfort your loss with have to your family and take a cover only to that extent.
(2) when current assets exceeds the liabilities and future living cost of dependants then the need for insurance no longer remains
If your earnings is such that it meets your current requirements and any possible future requirements, for gods sake don't buy an insurance policy.
(3) in majority of cases Term insurance works out the cheapest soln to the above issue.During the period (generally 10-20 yrs) that the term cover is in operation the focus should be on creating a good amount of assets, thereby ensuring that the need for insurance no longer remains
I completely agree with this point. When we start of initially our take home is less and if one is married and has kids with all non working people in the house, the onus is on the working person to cusion the family against the untimely death of the bread earner. So it beholds upon this bread earner to have some brains to take a term plan which will cusion him and use his brains to invest in other instruments so that after the term plan expires, the family is in a position to take care of itself as you have sizeable assets to tide over your untimely death.
Alright let me summarize all points and suggest what I feel about life insurance
(1) If you have hell lot of money. Insurance is not for you baby
(2) If you are married and have kids and have very less assets and your untimely death will cause severe distress to your family then you need insurance.
(3) If you are married and have kids and have okey dokey money then probably you can still go for insurance to get that extra cushion.
(4) If you are not married. I sincerely suggest dont bother about insurance man... your death will cause only emotional distress and nothing more and an insurance plan will definitely not help your near and dear ones to tide over the emotional trouma.
My suggession:
(1) if you need insurance go for TERM INSURANCE based on what is actually needed. Carefully decide how much insurance is needed. Dont blindly buy.
(2) For the sake of the Almighty please DONT buy a ULIP !!!! It is a pathetic way of looking at insurance. Insurance should be treated as an insurance NOT an investment. If you want to invest, invest the way you should by either buying stocks, corporate bonds, RBI bonds, Mutual Funds, currency, gold, art, real estate funds, gold funds, property.
Why ULIP ?
posted by amitkeerti | 12:58 AM
1 Comments:
Nice. But I believe this would say EVERY good broker/agent. Term life becomes more and more popular and people realise its advantages - it cost few bucks a month. And as a dealer of disability insurance in Toronto I always say to my clients - when your family leaves the nest and doesn't need to be protected by your life insurance, it's time to switch for disability or long term care, because disability can pretty ruin your's family life, even when they have their own lives...
Take care!
Lorne
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