At 26, single and with a growing responsibility towards my family, I decided to insure myself. Great idea, agreed my financial planner, advising me to opt for a term plan. Reason? It's the cheapest form of insurance cover and moreover, I'd be able to reap the benefits of youth by paying a low premium for a high cover.
However, a trip to several insurance companies convinced me that while term covers may have takers, it's the sellers who are hard to come by. Almost all of them were bent on selling me - yes, only unit-linked insurance plans.
The reasons they gave were many. For instance, one insurance agent claimed that I would lose the entire amount. Another's contention was that Ulips always beat mutual funds in the long run. Here's what I came back with:
May 8, 2008, 5.30 p.m.: I am at an insurance company's office in Peninsula Chambers, Lower Parel, Mumbai. I ask the agent for a term plan saying I plan to go for a home loan and need insurance to cover the loan.
The agent asks my age, income and saving pattern. A bit of calculation on the computer and he says, "I think we have a better plan for you." The 'better plan' is a Ulip where I have to invest Rs 4,000 per month for a cover of Rs 750,000.
But I need a cover of Rs 20 lakh (Rs 2 million). So he suggests that if I increase the amount to Rs 5,000 per month, he will hike the sum assured by increasing the mortality charges. (The latter are costs that insurance companies charge to give life cover. For Ulips, which are a mix of investment and insurance, the premium is divided between the two, after deducting other costs such as, premium allocation and fund management.)
When I am not convinced, he shows me an illustration of how Ulips are even better than mutual funds in the long run and adds, "In the last one year, we have given returns of 60-70 per cent, better than any mutual fund."
But aren't term plans cheaper? He promptly says, "Yes, they are, but you should think about your future too." I tell him that I will speak to my financial advisor and get back.
Same day, an hour later: Next stop; another insurance company's office in Peninsula Chambers. Another investment advisor goes through the same ritual of taking down my age, income and saving pattern.
And then, suggests a premier product, another Ulip with the carrot, "This product has returned 167 per cent annually till January, 2008. Even now, the returns are quite high." When I insist on a term plan, he asks me to consider another product, a Ulip variant. Exasperated, I leave.
May 9, 1.30 p.m.: I am at an office at Kamala Mills, Lower Parel, to try out a large private insurer. Soon, there is another Excel sheet, churned out in a jiffy, with all my details.
The agent here promptly gave me the amount I would have to pay for the term plan, but it came with the caveat, "These are outdated products, Ulips give both insurance and investment benefits."
I explain to him that I am a regular investor in mutual funds. "Most of the money in mutual funds is from institutions and they trade in the market every day. These funds should only be looked at for short-term benefits," he advises.
When I ask him if the agent's costs can be reduced, he refuses to do so, but offers his services to make sure that my money will be in debt in volatile market conditions and moved to equities during an upswing all this for no fee (Ulips, anyway, offer four free transfers between different kinds of funds a year).
On the higher cost of Ulips the reply was, "While the industry charges fund management and mortality fees of 25 per cent, we charge only 11 per cent."
In addition, after paying premium regularly for three years, I would be entitled to free gifts and discount coupons. After an hour, the final stop: The office of a large life insurer in Dadar(West).
The agent again starts with how term plans are dead investments. And a policy that gives returns should always be the criterion. After a lot of haggling, he agrees term plans are cheapest, but says I should purchase an investment-cum-insurance product along with it.
After putting in efforts to purchase a term plan, I realised that though no one was directly willing to say that they do not sell it, they queer the pitch for buyers by including returns, loss of money and other factors. And even after spending over an hour in each of these four offices, instead of a simple term policy form, all I heard and read about was Ulips.