The whole fiasco surrounding Ulips has made the insurance companies look bad with respect to mis-selling of Ulips. But like one hand wouldn’t clap; only the insurers can’t be solely at fault. The average insurance buyer in India always wants ‘something more’ from the insurance policy on maturity. This shows that the rigid mindset of earning some return from an insurance plan is actually the main reason why insurance products with investment component continue to sell the most in India.
Suresh Jain, an experienced agent of Life Insurance Corporation of India (LIC) said, “I have noticed that people always want something from their insurance policy on maturity and they rarely understand their insurance requirements. It is very difficult to convince these people about their actual insurance needs because they stick to their point. This is the main reason why they prefer endowment, money back and Ulips over term insurance”.
Sajag Sanghvi, a certified financial planner said, “Very few people are willing to forgo the premium like they would in a motor or medical insurance policy where they won’t get anything if there is no accident or hospitalization during the period. Only people, who understand the concept of insurance, agree to go for term cover”.
Term plans are pure insurance products which are the cheapest and the best way to buy a large insurance cover. However, the policyholder will not get any money from term plans at the end of the term (or maturity in insurance parlance).
Insurance products with savings or an investment element such as traditional endowment or money-back plan or Ulips pay back the premium with returns earned from investment at the end of the chosen term.
The bottom line is Insurance is a necessity because it provides cover for human life and non-life products (health, shop, vehicle, etc.) and it should be bought for the right reasons – for protection.
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