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Are Indians over-insured?

By P V Subramanyam
January 08, 2015 14:03 IST
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Are you surprised at this title? Well, then read on to find out the truth... :-)

Illustration: Uttam Ghosh/

Has the insurance industry not been telling you that Indians are under-insured?

I met a lady last week who had taken voluntary retirement. She was not planning to take up a job again and it was the end of her working life.

She was under 40 years of age and her life insurance was in, well, a mess. She knew her policies in terms of premia per month, per quarter, or per annum.

But no clue whatsoever why she had any of those policies.

She was earning about Rs 30 lakh per annum and thus had tremendous premium paying potential. Her husband is earning about Rs 1.4 crore. Her parents or siblings do not need her money for sure. So technically she had no dependents.

She was paying a premium of Rs 5 lakh per annum for all he insurance policies she had. Her sum assured was a princely Rs 50 lakh!

She even had a money back policy meant to fund her son's education when he turned 19! He was not even 11 years of age.

Met another lady who was so terribly over-insured with TERM INSURANCE that to me it looked burdensome, and far more importantly, unnecessary.

If you are a woman earning Rs 15 lakh and aged 40, how much term insurance do you need?

Forget all thumb rules, about Rs 1 crore is enough.

And till what age should one have TERM INSURANCE? Till the age at which you will retire.

We are all fooling ourselves believing 60 years to be the retirement age. In this country of youngsters, people will be lucky to keep their jobs beyond the age of 55 years. So she needs a Rs 1 crore TERM INSURANCE, from the CHEAPEST PROVIDER, BOUGHT ONLINE.

Well that is what she NEEDS.

Only problem is that people buy what the relationship manager sells (term insurance) with extra loading (hey, the bank has to make money too) for an amount which the RM proposes. So it becomes a Rs 2.5 crore insurance, till age 75 (maam, it is available till 75, not like other insurance companies is the RM's USP).

SO WHAT you can ask, right? Well she is over-paying for an over-insurance for an excessive period of time. And worse, at a higher rate... tch tch... so what?

Hmmm... I wish I could sell a 'Wild Animal Killing You' insurance.

Value Rs 1 crore.

Premium Rs 750.

Valid for 1 year.

Brilliant deal no? Want it? :P

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P V Subramanyam
Related News: USP, NEEDS, Uttam, Rediff, RM