Conversation with an Insurance Agent

Phone sings...

"Hello Sir, I am ... an Insurance agent. We met at XYZ's marriage"

"Yeah, I remember. How are you?"

"Fine Sir. I would like to meet you personally to discuss on an Insurance Plan"

"Sorry, I am busy these days"

"It will not take more than 15 minutes. And no commitments. You can simply say no, no questions will be asked"

"OK, come on tomorrow"

Next day.

"Good morning, Sir. I am Mr. Agent"

"Hi, I am bit busy, so hope we can wind up soon."

"Sure, here is the plan I want to discuss. This is an endowment plan, Endowment plan is a saving and insurance at the same time"

"Wait, I am more interested in Term Insurance"

"Term insurances are not profitable sir. You will get the sum assured only if you die. Who wants money after dying"

"That is insurance for. In endowment policy also part of my payment is utilized for insurance, right?"

"That is true. But still you will get sum assured + bonus when the policy matures. In term insurance, it is a pity you will not be rewarded for surviving the insurance term"

 "OK, in your endowment plan, tell me how much coverage will I get for Rs 5,000 premium per month"

"For Rs 5,000 and for a 20 years you will get Rs 12 Lakhs coverage"

"12 Lakhs! That is seldom sufficient for my family to survive in my absence. So to get a Rs 50 Lakhs coverage, I need to pay my entire salary as premium? Do you know that I can purchase a online term insurance coverage of 50 Lakhs just for Rs 9,000 annually."

"But online term insurances are sold only by private companies. You cannot trust on them, sir. What if they don't pay after your death?"

"Some of them have above 95% claim settlement rate."

"But there is no survival bonus"

"I am paying same way for my vehicle insurance and medical insurance. No benefits on maturity. Then why not for Life insurance?"

"That is true. But you see this endowment plan. It is very attractive."

"OK, go ahead"

"This plan is an insurance and investment at the same time. In this plan, if you pay Rs 5,000 per month for a 20 year period, you will get 12 Lakhs coverage.In addition to that if you survive these 20 years, the company will pay you the survival bonus acquired so far. For 5,000 premium it will come around 10 Lakhs. For the rest of your life, you will get 5.5% of the sum assured  monthly. This will continue until you turns 100. If you die before that age, the sum assured will be handed over to your dependents. So, this plan is an insurance, retirement plan and investment"

"It seems too complicated. So, you are saying that I will get 10 Lakhs after 20 years?"

"Well, sir. It is not guaranteed. Our company usually pays that much"

"What do you meant by usually?"

"Sir, our company pays 5-6% as bonus nowadays"

"But there is no guarantee it will continue for next 20 years?"

"No sir. But every one knows that traditional insurance policies are safe"

"How can you say it is safe, if there is no guarantee of returns?"

"Sir, all these people are purchasing insurance policies thinking those are safe investment. Are all these people fools?"

"Probably they are. If there is no guaranteed returns, I prefer Mutual Funds."

"But in Mutual Funds, you can even lose your investment"

"Then there are other investment tools where return is guaranteed. "

"But those are not combined investment, insurance and retirement plan"

"See, if I pay Rs 5,000 per month for next 20 years in a PPF, I will get Rs 31 Lakhs at 8.8% interest rate, compared to your 10 Lakhs and 12 Lakhs later. And it is fully guaranteed. PPF has all tax benefits as insurance has. Only problem is PPF is for 15 years, not for 20 years. Still it gives you better returns for 15 years"

"But you will not get insurance coverage"

"Well, if I spend Rs 1000 per month for a term insurance, I will get coverage of nearly Rs 50 Lakhs. Then if I invest the rest Rs 4,000 in PPF, I will get more than Rs 25 Lakhs. Still it is much more profitable than your brilliant endowment plan."

"You calculations seem correct, however, do you think lakhs of people, who are purchasing this policy, don't know how to calculate?"

"I think so."

"Sir, it is very hard to sell insurance policies these days. People are getting more and more knowledgeable. Good bye, I need to find some one ignorant today to sell my insurance"

"Good Luck"