Oct 12, 2004 07:45 PM
7386 Views
(Updated Oct 12, 2004 08:24 PM)
Since Kiran as an agent of Met Life put forward his companies products I was reading his review of the description of his products and rightly as an agent for Met Life he was going to say how beneficial each one was. And rightly so Met Life would not pay him otherwise.
However, since this topic was on choosing a provider, I found myself writing several comments on his review on the possible drawbacks of the products listed. Since I was writing comment after comment I figured it might be easier to write an actual review of the basics in life insurance and what you should look for in an insurance company.
Basic Life Insurance insures the life of a policyholder. The policy holder pays the company a defined premium and on the policy holders death the beneficiary receives the insured amount(sum - assured). The premiums paid depend on:-
The age of the policy holder at the start of the policy - the older the person the bigger the premium
The sum assured - the higher this amount the bigger the premium
The term for which the premium is paid - the longer the lower is the premium
However most companys now do a range of products that include a savings element too.
The Three most basic types of products are
Term Assurance - this pays a benefit on the death of the policy holder if it occurs within the term. It may also pay the benefit on survival. This is more for protection.
Endowment Assurance - This pays the sum assured on the survival of the policy holder to the end of the term. It may also pay the a death benefit on death before the end of the term. This is largely a savings type of product.
Annuities - In return for a one-off premium the policy holder receives an income for a set term.
Most insurance products are one or a combination of the above. There is no reason why the premium or the sum assured is a fixed amount they can increase or decrease as the term changes.
These are the basic products but if every company writes a combination of the above how do you decide on a product?
What Kind of Product Do you Want - Are you looking for protection, savings an income or a bit of both. Your needs dictate the type of product you want to get.
What are your circumstances - If you have no dependants then do you really need or want life cover? Do you need a specific amount at a set time e.g. to repay a loan.
How much risk do you want to take.
Is the amount of benefit enough.
Can you afford the premium.
What happens if you cancel the policy, stop paying premiums etc Do you lose the benefit.
Once you have an idea of the products you should look at a variety of companies and see who has the best products to suit you. The internet can be a useful tool.
Once you know the products how do you choose the company?
Are they reputable. Will they go bust - if they do you are not going to get anything
Do they provide you with a share of their investment returns either in the form of an addition to the sum assured or as a reduction to the premium.
Are you paying for other people. Many Companies cross subsidise their policy holders. They may cross subsidise the old and the young(charge the older people less and the younger people more than the theoretical cost). Similarly they may charge smokers the same as non- smokers.
Again you should read the small print. Once you have chosen a company how do you buy the product.
This is usually done through a broker or an agent. The broker gets your business in return for a commission. Some brokers are tied to particular Companies and can only sell you business from that Company. e.g. LIC agents, Met Life. This reduces the option to look around.
Other Agents or brokers may be able to recommend you products from a range of companies.
Some Companies even sell products directly to the policy holder. By cutting out the middleman you can save money.
The internet can be a useful tool to shop around with as most Companies have websites that list products. The financial press also often provides surveys of the ten best products and you should try and find out as much information as you can before you buy the product as in the end there is only yourself ot blame if something goes wrong.
