Look who is afraid of insurance products?

Dec 10 2012, 09:34 IST
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Globally, Indian consumers are known to be smart buyers — often called ‘value seekers’ by marketers. (Reuters) Globally, Indian consumers are known to be smart buyers — often called ‘value seekers’ by marketers. (Reuters)
SummaryGlobally, Indian consumers are known to be smart buyers — often called ‘value seekers’ by marketers.

Globally, Indian consumers are known to be smart buyers — often called ‘value seekers’ by marketers.

Indians are always looking for the best deal and to maximise perceived price-value output. Purchase is preceded by a detailed understanding of the product’s functionality, durability, features, performance rating, warranty, fit, colour and customisation. This behaviour is true for almost all product categories and across socio-economic segments.

However, one critical category where Indians tend to falter, though, is insurance.

The average ticket size of a regular life insurance policy is Rs 20,000, the premium for which is payable every year through the policy term averaging 12 years. The purchase of a policy is often not as well thought as when, say, a 35-year-old buys a shirt that costs one-tenth that of the annual average insurance premium. The time and effort invested for both purchases is lopsided.

“All I want to know is where I should sign on the proposal form,” is a common response when it comes to insurance. The realisation dawns a few years down the line when policy-holders understand that they have made the wrong choice.

For instance, by casually opting for regular premium, the policy-holder may have mistaken the product to be a single-premium plan.

On its part, the life insurance industry has done a commendable job of educating and sensitising people about the need for adequate cover, planning for children’s future or saving enough for a post-retirement life.

However, customers continue to live in a state of inertia that eventually leads to dissatisfaction, grievances, high surrender rates and policy lapse. So, what are the basics that you should look for before buying a policy? To begin with, check if the plan covers you well and meets your long-term financial goals. Understand the product type — if it’s market-linked, be aware of the risk.

Be very clear about something as basic as a single-premium or regular premium. Check the payment terms and premium amount, taking into account changing income and goals.

My professor, whose classes had the best-quality participation, always said that the only stupid question is the one you don’t ask. When you plan a life insurance purchase, ask your agent or bank for all possible details. Read the brochure. Filling up the basic details by yourself is a matter of minutes but can save you a lot of trouble later. Check the lock-in period, surrender charges and maturity benefits after and

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