Term Insurance – A win-win Proposition!

As I sat down to pay my annual insurance premium, I also started to reflect on the latest earnings announcement of most private Indian life insurers made about two weeks back. One underlying theme that I picked from all their commentary was the focus on protection plans that these companies intend to focus on – of course they are in commercial enterprises and thus are more focussed on their own bottom lines. But unlike most financial products which tend to offer sub-optimum solution to the buyers and thus benefits one party at the expense of other, the term insurance or pure protection plans seems to be equally beneficial to the buyers and sellers i.e Life Insurance companies. This is contrary to the misconception I held till some months back unless I started reading more on this topic. And I would not say that my misconception that protection plans or term insurance was not a preferred product for insurance companies is not completely unfounded. The genesis lies in the fact that till now most of the so called relationship managers or direct selling agents or telemarketers try to push down investment cum insurance plans such as ULIPs or endowment policies down your throat.

Like most of fellow countrymen (and women), my first insurance purchase was also an endowment plan which one of the many feet-on-street agents of LIC coaxed my father into buying. But as I started to understand and took control of my financial decisions, I realised whats good for consumer is not so for sellers widely represented by the army of sales person who are driven by commissions they make. My recent reading-up on the insurance sector helped understand that the interests of insurance companies which are the ultimate sellers and the consumers are aligned towards protection plans. The distortion is arising from the middlemen who under the garb of insurance representatives are pushing sub-optimal products.

The direct selling model of insurance companies has come to a timely rescue of people where the protection plans can be bought online from insurance companies directly. But irrespective of the mode, it is important for people to understand whats good for them and not blindly buy whats being offered by commission agents. While the rhetoric suggests that the protection plans are growing, the penetration still remains low (~30%) and concentrated in urban centers. But as they say well begun is half done, hope to see the growth in term plans becoming more widespread. And the silver lining for me is that I have just few more years of premium payment for my first endowment plan 🙂

#pureprotection #endtoendowment #lifeinsurance

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