Which is the best insurance plan?

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Which is the best insurance plan?
Yesterday my friend asked me which plan of insurance I invest in. When I asked her the reason for such a question, she simply stated that since I work in the insurance industry and thus have knowledge, the plan I would have invested in would be flawless. Thus, in effect, she actually wanted to buy the same plan which I had. Though it really surprised me, I later reflected on the fact that investors really go crazy searching for an all-inclusive plan for their insurance needs. But does such a plan exist?

Honestly speaking, there is no such thing as the best insurance plan. Insurance is a technical product and its terms and conditions vary with different individuals. So if you are on the lookout for a plan that would be best for you because it was best for your friend or relative then you and your investment are in for a shock. Your insurance cover should be based on your specific requirements and suitability. Let us take a look at the points which make a plan unique-

1) Sum Assured (SA) - the SA of the policy is the amount of coverage taken by an individual. This amount is chosen at the discretion of the proposer and the premium amount is directly related to the amount of SA. So, your friend may choose to buy a policy with a higher SA if his premium paying capacity is high but the same amount may not be suitable to you.

2) Choice of plan- an individual's life stage determines the type of plan he might buy. For instance, a person with a kid would most likely to invest in his kid's future while a person of about 45 would actually aim to provide for his retirement. As such, no two individuals have the same need universally and the choice of plan should be apt to cover for the specific need.

3) Policy exclusions- this point is more applicable in the context of health insurance plans where the insurer keeps certain terms and conditions in its policies. A newly married person would like to seek out a plan which would grant maternity expenses while a middle aged man would try to seek out a plan with the bare minimum pre-existing illnesses exclusions.

4) Premium paying capacity- the most basic yet the most important point of difference is the premium paying capacity of different individuals. Everybody has different saving habits and the disposable income varies from person to person. In such a scenario, it is impossible for a universal plan to cater to all the sections of the economy providing optimum cover at a flat rate.

To sum it all up, insurance is an investment which depends upon the protection need of the individual which in turn varies from person to person. To class a product as the best product universally is like having a flat rate of taxation for all income categories. Not only will it be preposterous but also unfair.

The current professional market stresses on the fact of need-based insurance selling to prevent misspelling of insurance policies. So, the next time you go about enquiring your friend's or relative's insurance cover to generalize your requirements, stop and look at the above mentioned points so that you don't end up with a product that you would regret later.

Written By: Deepak Yohannan

The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal

For more articles by Deepak Yohannan, please visit MyInsuranceClub.com

You may contact him directly on Twitter: @dyohannan

Read more about: insurance
Story first published: Saturday, May 3, 2014, 10:11 [IST]
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