How to Choose Insurance Plan? | Life Insurance Buying Guide for India

747 views Wait, is this logic right? • Apr 28, 2023

Slog Reference: The no-nonsense guide to buying life insurance

Description

How to buy term life insurance? Without proper knowledge of the life insurance policies and how those work, you might be overpaying or underpaying for the term life insurance plan. If you are unaware of what is a good balance for life insurance between the premium and the policy plan, this video may help you choose the right life insurance policy.

Let's find out whether you need life insurance or not, what are the metrics to consider while buying a life insurance plan and how to choose the best term life insurance plan in this video.

Credit Card Secrets You Must Know: https://youtu.be/p6WHZHMLopo

Hope you enjoyed FutureIQ by Navin Kabra and Shrikant Joshi. Do hit us up on Twitter:
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Chapters:
00:00 Introduction
01:05 Life insurance basics
04:13 The problem with endowment
06:35 How much insurance do you need?
10:55 Who should be insured?
12:05 The quiz
15:49 Is it not necessary?

#futureIQ #lifeinsurance

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Transcript

- so did you know that your life insurance agent and Company are probably calling you no my life insurance agent is great he knows everything he tells me regularly how much of a return I'm getting on an investment if you are getting a return on investment in your life insurance then you are getting a substandard product and you are being conned what yes so today we should talk about this that what exactly is life insurance why it shouldn't be mixed with investment return on investment and what is the right way to buy life insurance and what is the right amount of life insurance to buy oh this is going to be really interesting please start so the whole point of life insurance is

0m 48s that if you die you're beneficiaries the people who are left behind they should not suffer financially yeah right that's that's basically the whole idea that's the best idea right what a life insurance company is doing is collecting together premiums from thousands of people yeah and they know that only a few of them are going to die okay so when somebody dies the money collected from a whole bunch of other people is distributed to the few people who die and the ones who didn't die lose their money makes it sound like a lottery more or less and but they don't really distribute all of the money okay of course some of the money they are keeping for themselves as

1m 36s their profit and their expenses right true now you should remember that all insurance companies make a profit right so they are definitely keeping a bunch of money for themselves that's a great Point yeah now what you that but you still want Insurance okay of course because if you happen to be one of the Unlucky ones that dies you do want money to go to your beneficiaries correct okay but there is no reason to mix this up with investment no hold on a second my policy says that if I die I get a certain love sum if I don't die then at the end of a certain period i anyways get a certain amount of money back yeah see that is

2m 19s mixing up see when you put money in a bank and you get it back with interest right uh that's investment yeah okay whereas when you pay somebody money saying that cover me my life so that if I die give me money huh the whole point of life insurance the way basic life insurance works is that you have collected money from thousand people and you've redistributed that money to the five people who died the other 995 do not get money back then what are they getting back they are they shouldn't be getting anything back what the company does is that it collects extra from everybody uses some of it for insurance and the rest they are investing on

3m 02s behalf right so you are mixing up two different products and investment product and a life cover product but I thought I was getting The Best of Both Worlds I think also if it's like you know uh is the best of both worlds but is he going to be the greatest basketball of all time no that is going to be Sachin yeah is it going to be the greatest bowler of all time no right if you have two cricket teams one has 11 jadejas and one has a mix of Kohli and Wicket keeper like and a fastballer like boomera and a spinner like Ashwin which one is going to win the one with the experts right so

3m 43s do not mix things up a microwave come Grill is a bad microwave and a bad Grill okay and that's what that insurance product it's called an endowment by the way endowment okay means that suppose you've got a cover of one crore if you die you get one crore if you don't die and the period expires you still get back one crore right that's called an endowment what is the disadvantage of this what the premium they are collecting is much higher because this much premium they need for life insurance and then this much premium they need for investing on your behalf and then giving you back the one crore in case you didn't die but of

4m 26s course because they are investing on my behalf they'll be taking service charges or whatever charges on top of it so it'll be they'll be skimming some of it and they are not investing all of it right correct and I mean they basically if you wanted to invest you these two right separate out use this for insurance and this you invest go to the best investing companies right don't go to an insurance company for investment if you separate this out so this is such an and this is a bumrah right and this is you don't want yeah okay make sense now that you put it that way so um so Naveen tell me who should have insurance and how much

5m 11s Insurance should they get and what kind of insurance so first of all kind of insurance right there is something called term life insurance okay which you pay a premium for a period like 10 years or 20 years at any time if you die you get back you get the full long-term insurance right if the term expires without you dying you get back nothing that's the this part the advantage of this is that the premium is ridiculously low compared to the premiums of the endowment insurances okay so if you are doing budgeting for your uh life right you will realize that doing a term life insurance is much much much easier on your budget because the premium is so

5m 58s small sometimes there'll be 5x or even 10x uh it can be okay so that's the first thing by term do not buy endowment Insurance do not buy money back Insurance endowment insurance is the jadeja insurance that you are explaining yeah okay the other thing to keep in mind is how much Insurance do you need let's take that question okay the important thing about insurance is that if you die the people left behind they should not suffer financially that's the whole idea yeah what you want to do is you want to figure out how much money they need okay the whole point presumably is that you are the person earning money and when you die your

6m 44s income goes away and they need to replace that income okay right that's yeah replace but there are a couple of interesting twists there okay okay first of all you have to uh figure out not how much money they need you have to figure out how much is the money they're falling short of okay because right now let's say now imagine a couple where the husband is working and the wife has chosen to be at home okay if the husband dies it is possible that the wife decides that you know now I can't afford to be at home the wife takes up a job okay so maybe the husband was making one lakh per month wife can

7m 28s get a job of say forty thousand then sixty thousand is the shortfall right okay you don't need a uh insurance which will give her an income of one lakh you just need insurance which will give her an income of sixty thousand correct the shortfall correct so you have to compute what is the monthly shortfall which is the monthly expenses minus the income that can be generated correct also you might consider reducing the monthly expenses that she might decide that I don't have to live that luxuriously I can reduce some of my expenses right so that's one thing next you also have to now based on that once you have a number for monthly shortfall say sixty thousand you want

8m 12s a sum which is going to give you roughly 60 000 of income per month right you you will find online calculators which can calculate what is the lump sum that gives you a certain amount of uh this per a month so we also be adjusting it for inflation just off the top of my head those calculators do that I mean in the calculator you can put in this is the interest rate that one gets this is the inflation that is expected you put all of that in and it'll come back saying that for uh sixty thousand per month you need about whatever number yeah we will try and find those calculators for you and put them in the

8m 52s description so you will have an easy link to get to there but if you are lazy I'll just give a simple uh rule of thumb which is that multiply the monthly income by 200 and that gives you approximately the lump sum needed okay but this is so in the example of sixty thousand uh multiplied by 200 gives you no that's not the term insurance you need that's what is needed to give you your monthly income but in addition there can be other big expenses so if there is debt right you have taken a loan that needs to be paid back so add that into the lump sum if you have some big expense coming up that you know that

9m 35s I want to spend so much on my child's education add that into the lump sum okay but then also subtract savings from the lump sum if you already have 60 lakhs saved and in the market right subtract 60 lakh from the 1.2 crore right if you have assets you have gold or something like that subtract that also okay I have nothing so my number is going to be like looking finitely large I'm now sweating you can't see it but I'm sweating yeah but important is this calculations that is what tells you how much money you want right because money is only needed for living right the money is not going to be replacement for if shrikant dies I need 1.2 crore to

10m 25s feel happy right yeah so you have to calculate how much money is needed not how much Insurance can I afford correct so that is what you should do so we have answered how much Insurance what kind of insurance that leaves the third question who should be in short yeah so I explained how to calculate how much Insurance correct now if you do that calculation in some cases it comes out to be zero and you don't need insurance in that case Okay in what cases so my mom called me up one day uh saying that she's bought Insurance life insurance so that when she dies I will get money okay okay I am 50. my mom is 75 how soon right the

11m 11s point is that if she dies I don't need her income I already have my own income which is enough for me okay when she dies I want emotional support I don't need money so her buying insurance is completely because some agent called her and yet it makes so much sense I am I'm trying to wrap my head around it and if you are struggling I am with you but yeah this this is fantastic so in fact let's do a quiz who needs insurance right okay um life insurance quiz so this question is somebody insured the life of their 10 year old son with the beneficiaries being the 40 year old parents okay do they need this insurance are the 40 year

11m 56s old parents not working do they not have a steady stream of income because I don't I don't know why me ensuring and ensuring your 10 year old son kind of makes sense no it doesn't right if the Sun dies you will be sad but you don't need that sense income okay right that's on the other hand there is a 22 year old son and they ensure the life of the 22 year old son beneficiary of 50 year old parents does it make sense or not this should make sense right because the 22 year old son is probably the breadwinner of the household at that point in time and no 22 year old son's salary is going to be

12m 33s patterns but that doesn't that's not the main point then the main point is two things one is that did these parents spend a lot of their savings on this kid's education if they spent 50 lakh on the education and now they don't have savings because they know that the sons future income is what is going to replenish their savings or take care of them in their old age then yes it makes sense to do this insurance on the other hand if the sun was got into a college with a minimal fee and the parents didn't spend too much on the sun and they kept their own finances and savings intact then at this point insurance is

13m 16s not dated ah and so ultimately If the parents are going to depend on this child for uh their future then insurance is needed okay another example well this was the example of my mom right 17 year old mom uh and beneficiaries me makes zero sense okay so what I'm hearing is Insurance makes sense only if the person being insured is responsible for an income stream uh for the nominees who are going to be benefiting from that person's passing away yeah except I'll take one more example which makes it a little uh gives a little twist right so imagine a 35 year old stay-at-home mother okay she takes out insurance on her own life and the beneficiaries are her five and seven

14m 08s year old children this definitely makes sense because those children are dependent on her for their expenses and everything no no no no no the husband is there husband is earning he didn't die and how now what do they need into this insurance oh that's a tough one but giving going by all the explanations that you've given so far I would say no depends right if the husband's income is just enough to have this house running properly after the middle dies the husbands in expenses on taking care of the children maybe daycare maybe cooks and cleaners and this and that a whole bunch of expenses could increase depending on their situation and in that case the husband does need insurance to

14m 52s you know make up that shortfall make up that shortfall so it's that the woman the wife died she didn't have any income but she was saving them a lot of money right so unpaid labor has been taken into account very important and it's a it's a thing that most of us tend to gloss over but there is a lot of unpaid labor that helps us live our lives very comfortably so make sure you note that when you are doing these calculations for calculating what income what insurance uh term insurance you should be buying so now the question that arises is Insurance absolutely not necessary in most cases actually that's not true at all right I'm not trying to give that

15m 41s impression insurance is necessary in many cases right just have to calculate it properly so I just remember the case of one of my classmates who died young oh okay so sorry and uh I mean uh iitm so a very promising career absolutely no problems with anything in life but died young without having enough savings and we had to like take contributions uh so that his wife and kid wouldn't suffer right he absolutely should have had insurance right and this happens a lot right people die unexpectedly and the ones left behind struggle for money so you definitely need to do that calculation as to if you die how much money do the people left behind need so

16m 32s that they can continue a comfortable life and that I think is the Crux of the matter you have to calculate how much they will need if you die for Comfort not for luxury not yeah for Comfort not for luxury the answer can be zero remember that if both of you or if the whole situation has enough savings and what the answer might be zero or the answer might be a number that you will need to come to agreement with and start planning for so do take all of that into account and keep in mind that if you don't die you want nothing I want everything this is Naveen and this has been future IQ thank you