By Sunil Kadyan
The Indian insurance coverage sector reports a big surge in enterprise in the January-March quarter as salaried taxpayers rush into the tax-saving mode. More than 35% of the annual sales of life insurers are accomplished in this quick span of time. With hardly any time left for taking a judicious selection, persons are more prone to deciding upon an unsuitable program or paying greater premium for saving tax below Section 80C exactly where the maximum limit is Rs 1.5 lakh a year.
It is advisable not to obtain life insurance coverage only to save taxes as there are quite a few greater instruments readily available to save tax below Section 80C such as Equity-Linked Savings Scheme (ELSS), Public Provident Fund (PPF), Sukanya Samridhi Yojana (for girl youngster) which present greater tax free of charge returns.
Here are some of the frequent blunders folks make even though buying a life insurance coverage program.
Insurance as investment choice
Individuals must never ever mix their insurance coverage requirements with investment. Generally, agents market acquire of life insurance coverage solutions such as ULIP, endowment plans and revenue back plans citing insurance coverage with higher returns and profitable investment alternatives. But in reality, these solutions present returns of 4.5-6% which will not beat inflation in the lengthy run. The second disadvantage is the low insurance coverage cover in the type of low death sum insured. This quantity will not be adequate for the loved ones in case of untimely death of the insured. Even the premium of these plans is higher with low returns and inadequate cover. An person can believe of buying a term insurance coverage program for his insurance coverage requirements and go for other investment alternatives for earning higher returns.
Insurance as assured returns choice
Some folks like to obtain certain life insurance coverage plans which present assured returns. But the premium for these kinds of plans are quite higher. Such persons can believe of other investment avenues exactly where they can earn higher returns with much less investment as compared to classic life insurance coverage policies.
Insurance with non-health-related case
Some life insurance coverage plans with low sum insured are issued with out pre issuance health-related checkup. Plans such as endowment program, revenue back policy, ULIPs are issued with out health-related underwriting. The sum insured for these plans is low and ask for comparatively greater premium. Individuals just have to give a declaration of their very good overall health situation.
It is advisable to go for an sufficient sum insured with will need-primarily based appropriate life insurance coverage program even if health-related checkup is essential. If the health-related checkups are carried out prior to the problem of life insurance coverage policy, then the insurer can’t claim that the person had hidden some main details relating to his overall health circumstances (for which the health-related tests had been performed) in case of the insured’s death. In this case, the onus of proof shifts to the insurer.
Agent recognized to the insured
Generally, a new insurance coverage agent tries to sell life insurance coverage policies to his loved ones members, relatives, pals and other recognized persons. Sometimes the insured requires a quite rapid and forced selection to take a life insurance coverage policy which he does not will need at all. As agents are recognized to policyholders, they constantly insist or force them to acquire the life insurance coverage policy. The person does not want to ruin his connection with the agent so reluctantly he purchases the program. In this form of circumstance, the person must not take any sort of stress and ought to make an informed selection to obtain a will need-primarily based life insurance coverage program.
As buying the life insurance coverage program is a lengthy-term commitment exactly where the policy term will be up to 15-20 years, it is greater to believe twice prior to taking any forced selection. An person must obtain a pure term insurance coverage program initial from a protection point of view. This program must be bought on the web exactly where he can have an sufficient sum insured at a quite low premium. For instance, a 25-year nonsmoker can acquire Rs 1 crore term insurance coverage program up to 70 years of age for Rs 8, 000 only (yearly premium). Being a level premium, 1 must acquire this program at a younger age.
(The writer is assistant professor, Amity School of Insurance Banking & Actuarial Science, Amity University)