(This article was written with State Bank Probationary Officers in mind. It applies to anyone taking their first insurance policy)
Despite all the busy times which we are going through I believe you should make some time for yourself and it should be now. So please spare 5 minutes.
People had given us a rosy picture of our jobs. We, however, realized only after joining that it is not so. Everyone wants to get out of this HELL but somehow not everyone is successful. There comes the question why do we still work in such horrible work conditions thousands of kilometers away from home. The answer is we need money. For yourself and for our families or whatever the need may be.
LIC or SBI or HDFC – Which Term Plan should you buy?
Now coming to why I am writing this letter is to talk to you about insurance. The insurance policy should be as such that it will give income to our family god forbade even in our absence. Of course, many of us have taken Jeevan Anand or some other policy and paying 10k-50k per year but have you ever thought whether it is sufficient? I want to give you some tips on this topic.
It’s not the premium which you should look for, it is the risk cover (or) sum assured you have to look into. For the same 10000 premium, you can get 5 lakhs cover or 50 lakhs cover depending on the plan. Choose the plan wisely and don’t depend on the agent.
How much cover do you need? There is a method called “income method” which calculates how much insurance we need. As explained to us by one of our faculty at SBH, our insurance cover should be as such that if we deposit the money in the bank, the monthly interest we earn on the fixed deposit should be equal to our monthly income. It comes around 25 times the annual income. So for a typical Officer of SBH earning Rs.35000 the maximum insurance he can take is 35000X 12 months X 25 times around 1 crore. Yes 1,00,00,0001 crore eligible, so what next. Term plans are the cheapest in the market. Go for term plans if you don’t have one. In term plans, there is no return of premium. This is not for investment purpose. As a banker, for savings and investments purpose you can use our own bank tax saving fixed deposits or PPF.
Don’t put your eggs in one basket. I suggest you take a policy for 25 or 50 lakhs since this will be your first policy. Then next year you can take another policy. So policy can be split. It becomes easier in future in case you want to discontinue one policy.
You can check our LIC Merchant Login Guide for LIC Online Payment and Registration.
Which life insurance company to choose from?
SbiLife because our manager will be happy and we get a rebate? I took a sbilife policy for 50 lakhs. The premium after staff discount was 10,500 in the first year. My manager was very happy for 1 month because his target was met. Afterward started my problems. The second year premium was close to 14000 per year. I got transferred (now I jumped to LIC as AAO) to Kozhikode Kerala. I wanted to make payment in quarterly installments. I was asked to submit the form at the branch office in Kerala. For me going to submit the form meant putting half day leave and traveling 50 kms to find their office in Kerala.
Online plans from Icici, hdfc, aegon, reliance life. Of course, they are the cheapest in the market but will they honor their promise? you are Paying 5000 per year and will they pay 5000000 in case something unfortunate happens. Each company needs to maintain a life fund from which such money has to be paid out. The smaller and newer the company the meager will be its life fund and also its ability to pay the claim. So think on this
Life Insurance Corporation… I never dreamt I would take an LIC policy. My uncle is an LIC agent and he never guided us properly. Personally, I never liked him for bringing pesky. Agent apart let’s look at the other features.LIC has an office in almost every manual HQs. LIC has a life fund of 18 lakh crores to settle claims. All LIC policies have sovereign guarantee. it means Government of India is the owner of LIC is bound to pay the insurance policy money. No other company has this guarantee. LIC term policies are a bit costly 20-30% more than private policies but the claims settlement is good. A difference of 2000-3000 should not be much for you. Should it be?
The next important aspect of a term policy is the term of the policy. It simply means the duration of the policy. Please take for the maximum age allowed. In LIC it is 65 years. So if you are 30 years then you should take a plan for 65-30= 35 years. Other companies cover only for 60 years so the term, in that case, will be 30 years.
|Company||Product name||Age||Term||Sum Insured||Premium in Rupees||Link|
|LIC||E term||Age 28 yrs||Term 35 years||25 lakh||5050||http://www.licindia.in/premium_calculator.htm|
|Amulya Jeevan II||25 lakhs||5950|
|Anmol Jeevan||24 lakhs**||7560|
|SBI||Smart shield||Sge 28 yrs||Term 30 yrs *only||50 lakhs||9657||http://www.sbilife.co.in/sbilife/images/contentimages/smartshield_bi.htm|
|Smart shield (Smokers||11845|
|Smart Shield Smoker||25 lakhs||6369|
|Saral shield||Age 28 yrs||Term 30 years*||24lakhs**||7174||http://www.sbilife.co.in/sbilife/images/contentimages/saralshield_bi.htm|
So where to buy the policy from? LIC or SBIlife, I suggest you take the policy online. The online policy is 30-40% cheaper compared to plan if you take from an agent. The reason is also simple. The company need not pay a commission to the agent so it is cheap. In online policies generally the higher insurance value you opt, the cheaper the premium per lakh will be. In most cases, the benefit starts at 50lakhs. So taking one 50 lakh policy will be cheaper than taking two 25 lakh policies.
If taking SBILife you can take “e-shield” which is an online term plan. You won’t get staff discount in this. But the premium is much less around 7000 for 50lakhs for my age (28 years). Saral shield and smart shield are the offline plans. You get a staff discount. Saral shield is insurance cover up to 25 lakhs and smart shield for insurance cover above 25 lakhs. I am paying 10000 for a 50 lakhs cover under Smart shield.
If convinced to buy from LIC, there are also 3 plans. Anmol Jeevan for cover up to 25 lakhs and Amulya Jeevan for cover above 50 lakhs. Both are offline plans and an agent is involved. There is another online plan e-term. No agent is involved 🙂 you have to fill the plan details and pay online. Premium wise it is cheaper when you take insurance cover above 50 lakhs. For my age of 28years, a 50 lakh eterm policy will cost around 9000.