Swapneel Shah

I saw the Kya aapko Kam Insurance Lene ki Bimari (KILB) add campaign by AEGON Religare and I thought of writing some of my views and experiences that I have had with Insurance… Of course, I am NOT gonna write on topics like Why Insurance? Which Company? How much? should one go for money back or pure insurance? etc. I guess there are already 100s of  articles on web for them…

This is my 4th fiscal where I am adding on insurance policies to my portfolio. When I thought of taking insurance, I had lot of surfing throughout the web that gave me numerous ideas and confusions… I decided to go for a Money Back policy over pure insurance… So those against Money Back policies may drop reading here… This write up does not consider Money Back policies over Pure Insurance polices or vice-versa…

So I decided on Money back policy and did a custom plan to take a money back policy each year so that my returns from earlier policies in turn pay my next premiums… Also after a initial bust in the premiums the rest years premiums remain constant and fairly low… Lets take an example… Suppose I take Life Insurance Corporation’s (LIC) Jeevan Surabhi policy with Policy term as 20 years and policy paying term as 15 yrs for 4 lac at the age of 24 (year 2006). So the numbers look like this-

Notice the asterisks (*), these would be the years where my total money going from my pocket is high… This is how most of us, take a policy… And in-case if in any of these asterisk years, if your personal finances get disturbed, then you are at a risk… And the probability of this risk hitting is quite reasonable as the number of asterisks are more…

So instead of this, I took the same cover across 4 yrs… I divided the 4 lac policy into 1 lac each and took it over 4 years… Now the numbers look like this-

Here you can note that the number of asterisks have gone down from 12 to 3! And the net amount going from my pocket is quite low, constant and manageable… Also the risks (asterisk) are taken care of in the initial years, where one can devote more funds as one has less responsibility and can save more (spouse, kids, etc)… If you have Girl Friend(s), then God save U!!!

Some passing tips:

- Also breaking the policy into smaller chunks gives you an option to drop some premiums in case of a problem, and continue with part of the insurance policies, instead of going without cover, if you cannot pay the complete premium for a single big policy…

- Further spanning the policies taken over a few years gives you more time of your changing insurance needs so that you can go for lower/higher covers in subsequent years…

- I also made sure that I have the dates and premium installments (yearly, half-yearly and quarterly) scheduled in such a fashion that I have to pay some premium each month… This helped me make regular monthly payments and not bother about a chunk installment that lies 5 months down the line from today. You can also go for Electronic Clearing Service (ECS) if making monthly payment manually bothers you.

- Note: Most of the agents will not agree to this plan, as they don’t want to let go a big chunk at the start, and get it distributed over years… I too found it difficult to convince my agent; though later he appreciated the strategy and also recommended to few of his clients…

Swapneel*