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POSTED BY ON February 15, 2012 2:35 pm COMMENTS (8)
Hello ,
First let me clear that I am not an insurance agent neither I am working in finance domain.
On this forum in many articles many members have mentioned that instead of any child plan or any endowment policy we should go for “Pure Term Insurance + PPF+Mutual Funds “ model.
I totally agree that one should have pure term insurance. But I have opinion that one should also have some kind of endowment policy.
For the same amount of premium, in general endowment policy gives less coverage in comparison with pure term insurance. So I feel that the chances of getting claim settled in case of endowment policy are more in comparison with claim in case of pure term policy. So if a person has both the policies (term policy and endowment policy) then if claim for endowment policy gets approved then it can act as a supporting case for claim for pure term insurance.
So please guide me whether my assumption is correct ? Is it beneficial to have at least one endowment policy in the support of pure term policy ?
Thanks ,
– Yogesh
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Dear Yogesh,
In case of Early Deatlh Claim, which happens with in 2 years of taking a policy , in this case each and every company is bound to do the investigation.
After 2 years, the Insurance company has to prove that the Life assured has submitted wrong material facts and when you take a huge cover, the insurance company does a medical examination, which in the insurance terms it is said that they do the Prognosis, meaning with the same condition what will happen to the insured say after 15- 20 years.so the insured is safe and hence the nominee will get the claim.
Regards,
Harish
Dear Yogesh, please check the IRDA Data for claim settlement. All frontline Cos. are having it in the range of 80% +. Do you still feel your case ‘ll fall in the remaining 20% or less?
Thanks
Ashal
Yogesh,
As we both agree that in case of claim in early years , both endowment and term plan will go for same level of scrutiny. The difference is only in case of later years, lets assume 8 years. Till here we are on same page.
Now you calculate the returns that you will get from endowment plans in 8 years (claim accepted) , and compare with the returns if you take term plan (I assume it can be accepted/rejected) + remaining balance in PPF (8.5%) or any Good Mutual Funds (12%).
If you feel that the difference is huge then go for your choice. But if difference is minuscule then avoid it.
Endowment plans are not bought but are SOLD. And even in case of endowment plans if you die in first couple of years (may be harsh but true), company will do detail scrutiny.
Only if one dies after 5-10 years it doesn’t mater. Insurance company do not want to waste their resources as your sum assured is already been taken care by your premium amount paid.
So if you really think for security angle then don’t waste time. Take pure term plan ASAP. Tell truth about your health in documents.
Hi Sachin,
What you have mentioned “ Only if one dies after 5-10 years (after taking endowment plan) insurance company do not want to waste their resources as your sum assured is already been taken care by your premium amount paid.” I have also the same opinion for endowment plans. But for pure term plans this may not be the truth. I support to tell truth while taking any plan. Let’s assume a 35 years old person has taken pure insurance of 50 lakhs for 15 years term. If the claim arrives even after 8 years, the insurance company will do strict scrutiny. I think when the insured amount is high and it is pure term policy it will not matter much if it is early claim or not. Insurance company will find every reason to reject the claim. So my idea is to have one endowment plan and one pure term plan. Endowment plan to be taken in such a way (with less sum insured amount) that the claim to be settled easily. The intention is the claim from endowment plan can be settled quickly and can act as support case while claiming pure term insurance.
Regards,
Yogesh
Hi Yogesh,
Both Term Insurance and Endowment plans have a motive behind them. It is important that as a person seeking insurance you are aware of the usage of these instruments.
Term Insurance – pure insurance
Endowment plans – more of investment (low risk) and less insurance.
It is up to you to decide which instrument you would choose. Traditionally agents have been selling Endowment plans as it was easier to sell and helped them with an extra helping of commission.
Regards
BFA
Dear Yogesh, all of us are learning together. In case you are comfortable with the idea proposed by you, so be it. You may use it as per your own definition of safety of getting claim easily.
I’m of the opinion, disclose each & everything of your health & job profile while applying for a term insurance. Most of the time, Term cover prem. ‘ll go up. You & many other people think it as a negative thing. I think differently. If an insurance co. is loading up my prem. after knowing all the details of my health as well as job profile, it’as entering in the contract knowingly for the risk it’s taking as underwriting.
In future, if claim happens, there is almost nil chance of insurer denying the claim on concealment of materiel facts.
Thanks
Ashal
Yogesh – Not true. The endowment plan sum assured can provide very little in return really. Instead of shelling out 20k to 30k each year on the endowment policy one must just invest that surplus in MF+PPF to generate a corpus greater than sum assured.
Term insurance: Split the coverage across 2-3 companies. If you need 1 crore cover go for 2 covers * 50 Lacs each. Chances are less likely that both these will be rejected. Insist on medical tests when taking Term insurance [it is compulsory anyways of late].