Mr. Narendra called me to ask about his life insurance. Like all smart yuppies he knew everything about life insurance but just wanted to check out something.

He had a life insurance (term) from ‘A’ life insurance company. His sister in law was the agent, so he had taken it from them. He was paying a premium of Rs. 130,000 per annum for a Rs. 2 crore sum assured. Of course he had done some research and then chosen this company. This was in 2007.

Now a competitor company was offering term insurance company – let us call it ‘B’ Life insurance company was offering term insurance plans for his age at Rs. 97,000 per annum. His question was should he lapse his first policy and take the second one…?

Typically I said it depends…..

He said for free i only say it depends. If you want to know it depends on what, it is a chargeable option and you need to pay me a fee (I quantified it for him at 12k) if you want me to go ahead and fill in the blanks. He promised to send me a mail…and I am still waiting.

I know of a lot of people who think of term life insurance as a simple OTC product (including some websites, and many financial planners). Let us hope that they know what all to see in a term plan before jumping up and down about the price.

Yes term life insurance is an inexpensive product, but if you buy it without application of mind, it could be very costly, even if you bought it cheap! Best of luck. Think hard what can go wrong in a simple product like Term insurance?

Hmmmm worth thinking about, correct?

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  1. ‘what can go wrong in a simple product like Term insurance” – you die and the insurance company denies/delays/defers payment!!!

  2. What can go wrong ? Few guesses

    – It has a catch on “how the person dies” . If person dies a natural death because of diseases : no insurance.
    Only accidental death is covered and only few types of accident is covered.
    – Sum assured may be very less.
    – Sum assured is not paid in lumpsum, but only on annuity that too on 3% annual interest. Annuity expires and lumpsum lapses once nominee also dies (or annuity expires after 10-15 years).
    – Insurance company rejects/delays /drags the payment based on silly reasons.

  3. nice post..
    what do you think about aviva’s term insurance plan?
    heard they are the cheapest once. please share your thoughts


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