Priya is 28 years old, lives and works in Delhi and was looking to get term insurance to financially protect her ageing parents.
She did what a lot of folks usually do – Went to her local bank where the friendly bank manager was only too happy to get her a quote for term insurance. Nothing seemed amiss and she told him she will get it done in a few days time.
While she was talking to a friend ( who happened to be an existing Finqa client ) about some other money matters, he asked her to talk to us once before she invested her money.
During our conversation, she casually mentioned that she was planning to buy a term insurance policy of Rs 2 crores from her bank.
Now anytime bank managers recommend any product to clients, we usually do a double check.
So we asked her for the proposal form – And boy were we glad we checked it 🙂
On first glance, it seemed that the bank manager was indeed selling her a term policy of Rs 2 crores ( and not an ULIP ) but the premium at Rs 37,103 seemed way too high for her age and cover required.
We got a separate quote for a pure term policy of Rs 2 crores FROM THE SAME COMPANY were shocked when it came to only Rs 13,183.
Why was there a difference of Rs 24,000 between the bank manager’s quote and our quote from the same company ?
We looked at the earlier proposal and discovered the difference.
- Bank Manager’s Quote – Annual Premium Payable: Rs 37,103
- Term Cover of Rs 2 crores
- Critical Illness Rider
- Our Quote – Annual Premium Payable: Rs 13,183
- Only Term Cover of Rs 2 crores
The difference of Rs 24k in premiums was becuase the bank manager had added a critical illness plus rider.
What this essentially means is that if Priya got a critical illness like Cancer, AND if she survived for 30 days after diagnosis, the insurance company would pay her a lumpsum amount of money.
The amount of money payable to her would be Rs 1 lakh !
Yes, you read that right – If she got ill in the future, by paying an extra Rs 24,000 per year for the next 30 years of her life, AND she survived it for 30 days, she would get a measly Rs 1 lakh.
Do you think it’s worth paying Rs 24,000 extra every year just to get Rs 1 lakh when you get cancer ?
It’s not worth it because a one time payment of Rs 1 lakh won’t really help much with treatment expenses and you probably already have a health insurance policy which will cover the expenses.
Our recommendation to Priya: Since she already had an existing and separate health insurance plan, we asked just get a pure term plan for Rs 13,183
(and save Rs 24,000 per year or Rs 7.6 lakhs over the next 30 years)