We don't deal in Insurance products, but looking at the misselling all around, we thought of sharing our thoughts on the same.
In general, financial institutions love creating complex products. And the reason for this is simple: they need to hide how they are making money behind all the schemes and offers they come up with.
The insurance industry is no different. You have an endowment plan, ULIPs, and multiple types of health and life insurances. All these options have so many different features that it becomes extremely difficult for anyone from outside the industry to understand them well. This lack of understanding is exactly what helps them sell you products that benefit them way more than you.
In this email, I will share the only two insurance products that I find to be useful (apart from the compulsory car insurance) -
Term Life Insurance - If you are the sole/major bread earner in the family then you should get a term life insurance. This insurance will ensure a decent cover amount for your family in case of your untimely demise.
Let me warn you, when you go out to buy this you will be strongly sold an endowment plan or a ULIP. Do not fall for it. You will be told that you will get your money back in an endowment plan and that you will earn interest also. What you will not be told is that the cover amount in this scheme will not even be 1/3rd of a term life insurance and that the returns will only be valid if you withdraw after the policy matures (which is a long time).
It is best to not mix investment with insurance. Getting a simple term life insurance and investing the other amount in mutual funds or with Katalyst Wealth can be way more fruitful than getting a ULIP and mixing the two. Make sure the term insurance you choose covers at least 10 times your annual living expenses.
Health Insurance - Get family health insurance. Make sure you get a separate health insurance for your elderly parents because if you include them in the family plan then the premiums will be calculated at their age and will be significantly higher. Make sure that the health insurance includes the best hospitals in the city in its partner hospitals list.
The key here is to understand the claim process and to keep all documents handy. Most of the time people don’t even know the benefits they are offered and end up paying even when they could have claimed. Sit down with your insurance agent and understand all the benefits well. Also, whenever you are going to incur a medical expense make sure to confirm with your agent if it is covered in the policy or not.
Remember, never mix insurance with investments. If you want to invest, consider mutual fund schemes or consult stock advisors. Do not get confused. Keep things simple.