Khota Paisa

Insurance – Not For A Common Man

Posted in Insurance by khotapaisa on November 7, 2009

In the world of insurance, there are countless types of products. Each offering a unique set of features to attract the investors. But all these products are designed to benefit the insurance companies, not the investors. Surprised! Don’t be. Let us go thru some of the hot-selling insurance products in market.

1. ULIPs  – Without going into details, let me tell you that ULIPs have been the costliest insurance products of all. Now how does it go with the fact that they are the most sought-after products! If you are interested to know the ULIP story, you can follow the link here.

2. Endowment Plans – These are classic insurance plans which were the only insurance product we Indians knew of till ULIPs arrived. They typically pay you < 5% return. 5%! Would you go for a FD offering the same return today?Though common sense says that there is no reason you should be buying this kind of products, there are some execptions.

3. Other Exotic Plans – Some of the exotic plans in market are guaranteed NAV plans, ULIP based health plans etc. These are some of the most complex insurance products out there. But why would someone launch such complex products? Well, it is made to be complex to hide the various holes thru which the insurance company skims you.

The only product that is designed for the common man is the pure term insurance. Ever seen an insurance agent trying to sell a term plan? Let me know if you ever see one! After all what do you expect the insurance companies/agents to sell you – A products designed to benefit you or A product designed to benefit them?

Moral of the story – If it’s being sold to you, it is designed not to benefit you.


5 Responses

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  1. Yogesh Pant said, on November 16, 2009 at 1:06 pm

    Really liked the moral of the story! Anyway, I am also a newbie lost in financial jungle of information. The more you learn, the more confusing it gets. But yours is a nice blog, though I have just read one or two articles. Do continue with your good work.

    • khotapaisa said, on November 16, 2009 at 8:51 pm

      Thanx Yogesh. Do keep visiting the blog. You may also suggest any topic you want me to write on.

  2. Yatrik Vyas said, on December 3, 2009 at 9:33 pm

    Hi there,

    I have been reading your blog since last couple of months and like your articles.

    I have just came across some private insurance agents and would like to know your ideas/thoughts about “LIC vs private players”.

    I don’t trust private banks much and when it comes to invest money as FDs, I normally prefer less interest of nationalise banks than private banks. I think the same way for insurance as well. But I just noticed that I can get more than double amount poilicy with the premium I am paying to LIC.

    What’s your though about them and how safe they are to consider.


    • khotapaisa said, on December 4, 2009 at 1:20 pm

      If you are talking about term plans, I would like you to read this post.
      For other plans like ULIP(any other insurance plan, you probably don’t need it), there is an investment part of it. So the cost, features & performance of the plan become more important.

      • Yatrik Vyas said, on December 7, 2009 at 10:34 pm

        Thank you for the reply and post. I just check the post and got the idea.

        Appreciate your help.

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