Buying life insurance in a hurry?

The question is not about the insurance cover they are getting, but the tax they need to save and the premium they can afford to pay.

In India, insurance is mostly bought for tax saving. And since the objective is to save tax, people often decide on a fixed amount they want to invest. The question is not about the insurance cover they are getting, but the tax they need to save and the premium they can afford to pay.

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The result is an insurance policy that is of no use, as it rarely provides the desired life cover. When you also consider the fact that they give extremely poor returns, the saving seems a total waste. Tax saving should be considered as an add-on benefit while buying insurance.

Tax can be saved through a number of other options (including PPF, NSC, and ELSS etc), almost all of them offer better returns, in addition to other benefits and features.

Once you’ve picked out a policy, you can buy it directly from the company or through an insurance salesperson or broker.

The cost will be the same, but it may be helpful to get some information or help from a local agent.

Look for a person who will function as an ally. If you get too much quick-sell pressure, contact someone else.

Finally, keep in mind that many insurance policy variations are of the “bells and whistles” type — minor differences that don’t mean nearly as much as it is claimed to be. And one more tip: some salespeople recommend against term insurance because they get much higher commission from selling you an endowment or ULIP.

(The writer is Certified Financial PlannerCM, working for Gurukul Online Learning Solutions Pvt Ltd, Mumbai. Views expressed herein are his personal)