The biggest problem in Financial Learning or Financial Teaching is that the budget for training : budget for sales ratio is something like 1: 50 billion. Yes the sales budget for financial products is about 50 billion times the training budget for financial products.
Suddenly there is a surge among Life insurance companies to sell “term life insurance”. Well they want you to buy the regular term insurance, right? well, wrong. Read on.
So when a trainer with 17 year experience (OMG, I am really old)…these are some of the things I say…and how you can get killed if you did not know how the industry can twist things….
- Index funds are simple products: Sorry. In the US Index investing used to be called Passive investing, where you did not have to do anything for long periods of time. However today you can buy a double leverage Index ETF. Did not understand? well, neither did I when I read it for the first time. Your money in an INDEX FUND is used as a margin to buy Futures products by selling today. Oops – some of these products are lending products, many are leveraged of course, and I can assure you that none of them is passive. So much for my basic statement.
- Term Insurance is simple to understand: well you thought term insurance means you paid a premium from your starting age till the age you need cover, and if you did not die during that period, all that you got was peace of mind. Right? Well a very famous host was saying on TV that there is a fantastic twist today in the new products offered. “Return of premium”. Aww…you pay life premium for 30 years and at the end of the period the premium is returned to you if you do not die. Brilliant, right? well Bullshit. It means if you buy this product in 2018 for 30 years….you will HAVE TO PAY premium for 30 years.
There is another term insurance product is being launched….the 5 pay 30 year term insurance. This is one of the worst products that you can buy. It makes no sense for a 55 year to buy a 5 pay, 30 year term insurance!
You need life insurance till age 55 (earning life I presume) – by this age you should have earned enough for meeting all your goals. If that is so, you should not be buying any life insurance at all.
At 55 for many of us our children may have settled down AND/OR you may have started down sizing your career. Well, again you do not need life insurance. I have done tonnes of articles on term insurance…so look at them. A quick summary:
- buy ONLY online term insurance
- buy cheapest company with which YOU are comfortable
- I am comfortable with cheapest, but right now I am personally beyond insurance, I do not need it
- buy quarterly premium…NEVER BUY small pay for long term
- buy only till the age when you will work – 50, 55, 60….whatever
- buy only till your wealth is not sufficient to meet your goals
- if suddenly you hit a lottery – inheritance, esop….whatever give up your insurance
- pay premium regularly, and see if cheaper alternatives exist
- read up all my posts on term insurance
DO NOT GET CARRIED AWAY by new variants of Term Life insurance. Even if it is by companies which told me “Subra your CREDIBILITY will go up if you write for us…and if you publish your articles on our website”. Sorry I said, Icici group does not invoke so much confidence in me.
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