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Ask mint money 24 april 2012

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I have a term insurance policy. When I compared the premiums charged for online term insurance with that charged by private companies, I realized that the amount that I am paying is very high and I can get the same cover at a lower premium. Why is there a differences in the premiums? Do private companies have a lower settlement ratio? Should I move to cheaper plans?

-Sandip Khetle

You are asking all the right questions. Online term plans are cheaper by about 20-30%, primarily because the insurer does not pay distributor commissions on these products. Private companies have a lower settlement ratio than government-owned insurers. However, I do not believe that this is driving the low cost of online term plans.

In you are Internet-savvy, then move to a cheaper online plan. Make sure you purchase your new policy and have it in your hand before lapsing your existing plan. Since you will not have an advisor to help you fill out the proposal form, make sure that all details are filled in completely and accurately. Incomplete or inaccurate information is a major reason for claim repudiation.

I am 26 years old and I want to buy a life insurance policy. My annual income is Rs. 7 lakh. My parents and my brother (15 years) are dependent on me. I will get married in October this year. Should I buy a term plan, endowment plan or money-back policy? What should be the sum assured? What are the things that I should keep in mind before buying a policy?

-Umesh

First, buy a term policy to provide maximum security to your family. You should purchase a sum assured of about Rs. 70 lakh, which is 10 times your annual income, for a tenor of 30 years, which is the maximum term insurers provide. This term plan will cost you about Rs. 6,000-8,000.

You could consider investing into equity through a growth-oriented unit-linked insurance plan with a tenor of 10 years or more.

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Ask mint money 24 april 2012

  1. 1. Ask Mint Money | Online term plans arecheaper as there are no distributor feesMake sure you purchase your new policy and have it in your hand before lapsingyour existing plan. Since you will not have an advisor to help you fill out theproposal form, make sure that all details are filled in completely and accuratelyKapil Mehta, Managing director and principal officer, SecureNowInsurance Broker Pvt. LtdPublished in Mint Dated 24th April, 2012I have a term insurance policy. When I compared thepremiums charged for online term insurance with thatcharged by private companies, I realized that the amountthat I am paying is very high and I can get the same coverat a lower premium. Why is there a differences in thepremiums? Do private companies have a lower settlementratio? Should I move to cheaper plans?-SandipKhetle You are asking all the right questions. Online term plans are cheaper by about 20-30%, primarily because the insurer does not pay distributor commissions on these products. Private companies have a lower settlement ratio than government-owned insurers.However, I do not believe that this is driving the low cost ofonline term plans.In you are Internet-savvy, then move to a cheaper online plan.Make sure you purchase your new policy and have it in your hand
  2. 2. before lapsing your existing plan. Since you will not have anadvisor to help you fill out the proposal form, make sure that alldetails are filled in completely and accurately. Incomplete orinaccurate information is a major reason for claim repudiation.I am 26 years old and I want to buy a life insurance policy.My annual income is Rs. 7 lakh. My parents and my brother(15 years) are dependent on me. I will get married inOctober this year. Should I buy a term plan, endowmentplan or money-back policy? What should be the sumassured? What are the things that I should keep in mindbefore buying a policy?-UmeshFirst, buy a term policy to provide maximum security to yourfamily. You should purchase a sum assured of about Rs. 70 lakh,which is 10 times your annual income, for a tenor of 30 years,which is the maximum term insurers provide. This term plan willcost you about Rs. 6,000-8,000.You could consider investing into equity through a growth-oriented unit-linked insurance plan with a tenor of 10 years ormore.I had taken five life insurance policies 17 years ago. All thepolicies will mature within the next three to four years. Iwant to surrender these policies due to a financial crisis.What should I do so that there is minimal loss?-PeterSince your policies were all purchased before 2000, they aretraditional policies issued by Life Insurance Corp. of India. Someof these policies had a loan provision that allow you to borrowfrom the insurer with your policy as collateral. Check your policycontract for this feature as this may be your best option. If theloan facility is not available, then read each of your policy
  3. 3. contracts carefully to understand if there is a surrender penalty.Surrender your policies in increasing order of surrender charges.Kapil Mehta is the managing director & principal officer,SecureNow Insurance Broker Pvt. Ltd

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