I read the insurance regulator wants policies to be sold based on the customer's need. How are insurers planning to take this forward? And, how can I, as a customer, ensure that an agent is abiding by this norm?
The regulator has released a draft document — Guidelines on Prospect Product Matrix for Life Insurance.
This is to understand the needs of a customer as a pre-requisite for selling life insurance. This is a very positive move by the regulator, as it will ensure the customers are provided the appropriate life insurance solution in accordance with their financial goals and stage of life.
Most insurers have mechanisms to implement these norms.
As a customer, you can ask your agent some critical questions to ensure the product suggested is the most appropriate.
The questions could be like — how would the product meet your financial goals, such as children's education, retirement planning, etc. Questions could also pertain to investing capacity and tenure i.e. yearly or half-yearly for 10 or 15 or 20 years and the return expected i.e. high, moderate or low. In addition, after implementation, a customer would need to fill a proposal-cum-need analysis form, on which signature of the customer would be sought.
How much life coverage should I take? I am 25.
Life insurance is a financial tool that protects you from the risk of dying too early or living too long.
The extent of life insurance one requires will ideally depend on one's human life value (HLV). To calculate your HLV, you must consider your current income, future financial goals, liabilities, such as loans or debts and the rate of inflation. Our recommendation is one should have a life cover at least 10-12 times of one's current annual income. However, it is also suggested you review your life coverage at every life stage i.e. marriage, becoming a parent, etc. to take care of the financial goals, which would change at each life stage.
Will being a smoker lower my life insurance coverage? If yes, does it vary according to the type of smoker I am? I smoke around 15 cigarettes a day.
Life insurers usually charge a higher premium for smokers. There are various research studies that suggest exposure to nicotine or its derivatives in any form decreases the life expectancy of an individual. Hence, in view of the risks associated with such lives, an appropriate additional premium may be charged. It is important to declare your correct smoking habits to the insurer while proposing a life cover, so the risk can be assessed and all facts are available with the insurer if and when a claim arises.
The writer is the CEO of Bajaj Allianz Life Insurance. Views expressed are his own. Send your queries at yourmoney@bsmail.in
