Insurance sales usually start to grow in January of every year and reaches heights in March. This is because people start to plan to save taxes and consider buying insurance as a safe way to save tax. It is not hard to understand the reason why people start to buy more of insurance during this phase. Here we have taken 4 case studies from 4 metro areas of India to understand what kind of insurance people belonging to these areas opt for and what is the reason for it.
Case 1- New Delhi
Mr. Ashish Kapoor, 33, is a Mechanical Engineer working with an automobile company. In his family, there is his wife Roma, 32, homemaker and a 3 year old daughter CarSite.co.uk .
Mr. Kapoor earlier had no idea about what the exact life cover he had. Later on asking, he revealed that he had some 21 traditional policies and he was paying around Rs. 50,000 premium per annum towards them.
He purchased most of his policies during the December to March period every year. And this is because initially his family agent would make him buy a policy or two and later when because he started receiving HR mails at work to submit the Tax-saving proof.
This shows that the sole reason to buy life insurance was tax saving. His lack of awareness and attitude of postponing things until the last minute made him an under insured person. According to his income, he should have had a life cover of at least Rs. 1 crore, whereas his cover could barely cross Rs. 10 Lakhs.
Case 2- Kolkata
Mr. Krishan Gupta, 34, is a Commerce graduate and holds his own garments business in Kolkata. In his Family, there is his wife, Rakhi, 33 a homemaker and a 5 year old son.
However, with time Mr. Gupta felt that insurance policies were a very low yield investment and was not keen on investing in insurance. He has a term cover plan for himself and one child plan for his daughter, investing the remaining funds in PPF.
He only trust government companies after various scams that happened in Kolkata in past. He has his term plan and Child plan from LIC. He says that he is aware of cheaper term plans available in market. But he does not trust private players and thus have taken a lower cover so that he can pay the premiums.
He bought insurance for the right reason, but due to business climate and conditions, he is under-insured.
Case 3- Chennai
Mr. Ramkrishan Iyer, 43, runs a small restaurant in Chennai. His wife Saraswati, 41 is a part time school teacher. They have a 13 year old son and a 10 years old daughter.
Mr. Iyer being busy with his business has no time to look at his books of accounts. He bought insurance just because his wife’s friend, Alka who had started insurance agency as pass time activity has asked him to do so. Today, Mr. Iyer has around 12 policies under his name, 10 policies in his wife’s name and 2 policies each in the name of his son and daughter, but he has no clue regarding the policies he has. He does not expect these policies to secure his future or cover his life risk.
He is also apprehensive about paying taxes and thus files ITR only to the extent of having no tax liability.
This prevents him from availing a sufficient life cover for himself. He earns around 10-15 lakhs a year, but as he under reports, he is not eligible to buy a life cover of Rs. 1 crore. He knows what a term plan is, yet believes that the trade-off is worth it.
So, he bought insurance just to maintain relations. He does not have enough life cover, hampering the basic purpose of life insurance.
Case 4- Mumbai
Mr. Yogesh Chaskar, 46, is a professor serving in a leading engineering college in Mumbai. His wife, Richa, 42 is a homemaker and occasionally takes hobby classes. They have a 21 year old son Namit and an 18 year old son Rajat.
He only believes in investing in bank FDs and has faith in his banker.
He once visited his bank to open an FD, and his banker successfully sells him a ULIP. The banker said that this ULIP is almost like an FD but offers higher returns, plus insurance and tax saving. After receiving the policy document, he realized that almost 30 to 40 percent of his investment had been wiped off under various charges.
He then decided not to buy any more policies from his banker. When his wife wanted locker facility, the banker said there are only limited lockers available and that he would give the locker to those who buy an endowment plan from him. And this made the couple buy the plan to get a locker.
Here, cars the purposed of buying the insurance was unwillingness to resist the selling pressure from a service provider.
Life insurance is to cover the risks of your life, and thus it should be 10 to 12 times of your annual income at a minimum. One should buy term plan to cover life risk as this way you get sufficient cover at a lower premium. Tax saving also encourages people to cover life risk and secure their dependents.