ARE WE BUYING RIGHT INSURANCE POLICIES?

There can’t be a better way of checking this than to ask certain questions to ourselves and seek honest answers for the same. Let's have a look at the following example:

I am the sole earner of my family and have a home loan of Rs. 10 Lakhs. I am buying endowment Insurance Policy of Rs. 2 Lakh on my life as well as on the life of my wife and kid. The questions that I would ask myself will be as follows:

1. If I die after 2 years, what will my family get? (Rs. 2 Lakhs + bonus)
2. How long can my family survive on this Rs. 2 Lakhs + Bonus?
3. What is the source of my family’s income in my absence?
4. In the absence of any reliable source, how will my family pay the remaining premiums for the policies that I am buying for them?
5. Due to non-payment of remaining premiums, will these policies not lapse?
6. Will the amount saved in these policies be of any use to my family at this hour of crucial need?
7. Who will pay for my kids’ education and marriages?
8. Who will pay for the remaining EMI for the home loan?
9. If future EMI’s remain unpaid, what will happen to my home and my family?

It is also worth while to ask questions like the following; after payment of 2 premiums, if my earning position deteriorates then:

1. Can I withdraw the savings done during these periods to tide over my crisis period?
2. Will I get loan from a policy for which just 2 premiums are paid?
3. If not how will I pay my future premiums?
4. If future premiums are not paid, won't the policy will lapse?
5. After 3 years of policy lapse, if my earnings improve; can I revive the policy and continue without any interest payment and penalties?

When we view from the perspectives of life uncertainties, there can be many more questions. Life is full of uncertainties and no body knows about the next moment. Therefore 'I will not die' or 'my earnings will never deteriorate' are not honest answers or assumptions.

It is left to you to judge yourself if you are buying right insurance policies. However we can only say that after opening up of the insurance sector, better and cost effective alternatives are available whereby you can find honest answers to all the above questions and put yourself in a winning and commanding position. To learn them read this book.

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