Personal Finance Queries For The Day (26-08-2019)

Raman Sharma, Lucknow: Is it advisable to buy policies online?

There is no denying that there are a host of obvious benefits when buying policies online. It has been observed that a large majority of consumers, research online to select the most suitable insurance plan for themselves but a large number of them buy offline. Researching online is certainly easier and more efficient and consumers who do not need much handholding while buying a life insurance policy, believe that in case of an eventuality, their family will have the ability to manage the claims management process with the life insurance provider directly, and having fully understood the product they plan to buy, may opt for buying life insurance online.

However, if the potential life insurance buyer does not have ample clarity on his/her life stage needs that insurance will serve and how to distribute the investable money amongst various needs, it is advisable to buy through life insurance agent advisors. These agent advisors not only ease the buying process, but also conduct need analysis to identify your long-term financial needs and investment risk appetite to suggest the most suitable product options to you. In addition, they also help you understand complex product designs and help you take an informed decision. Today, new-age agent advisors have also adopted digital tools which have made offline buying process also very efficient.  

Mahesh Prajapati, Jaipur: I am a 50-year-old professional and earn about Rs 9 lakh a year. I plan to retire in the next five years, but I will continue to contribute to my family's needs. How should I decide what cover to buy? Should I buy a term plan for the next fifteen years, or buy a ULIP for the same period, to save tax and earn a steady income? 

What I could make out from your question is that you plan to retire from active work life in the next five years but will continue to earn post that as well to support your family. First of all, you should have your Health Insurance in place as you would surely need it as you grow older. Also you are looking to protect your family from any eventuality and at the same time create a steady stream of income post retirement. With these objectives in mind, you should immediately opt for a term plan, if you do not have it yet, that will ensure that in case of any eventuality resulting in absence of income flow which you provide, your family is able to maintain its current lifestyle.

ULIPs are market linked products and your investment may be subject to risks related to market cyclicality. Given your age and investment horizon of 5 years, I would not suggest ULIPs for you as there is risk of being caught at the wrong end of the investment market cycle. Hence, you should opt for a safer investment option to avoid any loss of capital and post retirement invest the corpus in either immediate annuity, that will offer you immediate annuity payments; or Deferred Annuity Plan which offers annuity after a certain date (in your case, after retirement), which will ensure a steady flow of income for you.

These queries are answered by Aalok Bhan - Director and Chief Marketing Officer, Max Life Insurance