[ghodlur]

@backseardriver,

I really doubt whether any Insurers would provide a backdated poilcy. Never heard of any such concept. Any idea of Insurers who do provide such things. Atleast LIC does not do, I'm sure of it otherwise I would have know of the same through my friend who works as an agent.

Frankly Insurers would not benefit from the such a concept as they would loose on the premium which definitley must have increased with the age.

[BaCkSeAtDrIVeR]

1. There are limits to extent to which backdating is possible.

2. There is a column in the application form asking whetehr I want to back date the policy.

3. LIC's site is silent as to backdating. The agent says "saar, not bneficial for you"; and hence, LIC IS discouraging it.

4. But I still want to know what this is all about.

[rishab.k]

Originally Posted by BaCkSeAtDrIVeR

Can anybody help me understand the concept of backdating in Life Insurance?

This might be of some help to you.

The Hindu Business Line : Advantages of backdating insurance policies

[BaCkSeAtDrIVeR]

rishab, thanks dude, that is exactly what I am looking for!!!

Wondering why google would not throw up that link.

This is the only link on LIC website which mentions back dating.

https://www.licindia.in/term_assurance_001_benefits.htm

But most other policies allow backdating with nominal interest, probably 8%.

I would need that, since I am adviced a policy with maturity of 25 years, and that is a bit too far away. But in my case, I derive no benefit of lower premium by dating back. :-(

[BaCkSeAtDrIVeR]

I finally got my policy from LIC itself.

SInce I was paying premiums half yearly, and wanted to pay an entire year's premium this financial year itself, opted to backdate the policy. Interest is 8% or odd. Minscule amount - did not bother to do a split up.

I also enrolled the policy into my onlien login account; so that I can make online payments from my bank account.

Other insurance providers were quoting (online qutoes --D ) higher premia for similar / identical plans. This is an endowment policy. Now, do not preach me about how endowment policies provide around savings bank rate of interest. I know, but that king of almost secure investment has its purpose.

One thing which has me ticked off is the reluctance of Life insurers to provide pure play term life insurance (only insurance, no savings). This is happening with my brother in law, whose idea is that life insurance policy is for, obviously, insuring one's life and not for savings / investment. I do agree with him, but the way my finances will be structured, that objective does not fit in.

The problem with that approach to insurance is simple. Let me explain.

Bil (brother in law) decided on the insured amount (50 lakh) in two ways - first he started with teh amount he is willing to spend on insurance premium. Next, he took his annual income and multiplied it by a factor of N (not sure if it is 8 or 10). IIRC, this is the correct way of deciding whether one is insured for the right sum or not. Both ways, he arrived at a figure around 50 lakh. He first approached (against my advise) ICICI pru, since ICICI is his primary banker. They kept teh decision pending for close to 8 months, and finally rejected him.

So, he approached LIC, and did disclose that he was rejected by ICICI. (it is required by law).

It is 7 months now, and the decision is still pending. :-(

The problem lies in decision making structure within LIC. While the office is in Ernakulam, the decision has to taken from their Chennai ZO / RO (not sure of the nomenclature). It was first, a medical examination, which went through quickly, within 3-4 days, IIRC.

Next, the files went to the highest up office within KL, which sent it to Chennai. Three months later, Chennai, asked for a treadmill test. (he is 95kg+, but more than 6 ft tall, so BMI is within reasonable limits, and an NRI to boot). Since the tread mill test outside India woulc cost him almost the flight fare, he decided to take it when he is here (he had to come in one month or so). Total time lost till now - 5 months. 2 months later, he is asked for a copy of his passport and visa. He is like

Still, better than ICICI, which has not given any reasons for the rejection.

[rishab.k]

@ Backseatdriver,

Ideally, the insurance amount should be 100 times of your monthly income.

Here is another link for you to calculate the insurance amount based on the family's monthly expenses.

Calculate Amount Of Insurance To Cover Your Family Need

[BaCkSeAtDrIVeR]

rishab, thanks for the link and the specific info but I was intending annual income. so it does not make much a difference.

[carboy]

Originally Posted by rishab.k

Ideally, the insurance amount should be 100 times of your monthly income.

These are all stupid thumb rules which were most probably spread by the insurance industry.

Sort of like how the diamond industry managed to spread the thumb rule in the US that your engagement ring should cost twice or thrice your monthly income.

I can imagine an insurance figure which is calculated based on your monthly income, but basing it on your income is ridiculous & most probably a thumb rule devised by someone who benefits from it.

[rx2389]

Originally Posted by BaCkSeAtDrIVeR

I finally got my policy from LIC itself.

SInce I was paying premiums half yearly, and wanted to pay an entire year's premium this financial year itself, opted to backdate the policy. Interest is 8% or odd. Minscule amount - did not bother to do a split up.

I also enrolled the policy into my onlien login account; so that I can make online payments from my bank account.

Other insurance providers were quoting (online qutoes --D ) higher premia for similar / identical plans. This is an endowment policy. Now, do not preach me about how endowment policies provide around savings bank rate of interest. I know, but that king of almost secure investment has its purpose.

One thing which has me ticked off is the reluctance of Life insurers to provide pure play term life insurance (only insurance, no savings). This is happening with my brother in law, whose idea is that life insurance policy is for, obviously, insuring one's life and not for savings / investment. I do agree with him, but the way my finances will be structured, that objective does not fit in.

The problem with that approach to insurance is simple. Let me explain.

Bil (brother in law) decided on the insured amount (50 lakh) in two ways - first he started with teh amount he is willing to spend on insurance premium. Next, he took his annual income and multiplied it by a factor of N (not sure if it is 8 or 10). IIRC, this is the correct way of deciding whether one is insured for the right sum or not. Both ways, he arrived at a figure around 50 lakh. He first approached (against my advise) ICICI pru, since ICICI is his primary banker. They kept teh decision pending for close to 8 months, and finally rejected him.

So, he approached LIC, and did disclose that he was rejected by ICICI. (it is required by law).

It is 7 months now, and the decision is still pending. :-(

The problem lies in decision making structure within LIC. While the office is in Ernakulam, the decision has to taken from their Chennai ZO / RO (not sure of the nomenclature). It was first, a medical examination, which went through quickly, within 3-4 days, IIRC.

Next, the files went to the highest up office within KL, which sent it to Chennai. Three months later, Chennai, asked for a treadmill test. (he is 95kg+, but more than 6 ft tall, so BMI is within reasonable limits, and an NRI to boot). Since the tread mill test outside India woulc cost him almost the flight fare, he decided to take it when he is here (he had to come in one month or so). Total time lost till now - 5 months. 2 months later, he is asked for a copy of his passport and visa. He is like

Still, better than ICICI, which has not given any reasons for the rejection.

Term Plan is always cheaper & best option if 'Life Insurance' is the only objective for purchasing a policy. I believe your BIL is doing the right thing.

I feel that its better to buy the policy from two or more Insurance providers rather than purchasing a single policy with high cover. This reduces the risk to a great extent. Further, the insurance provider is also not that hesitant to provide the cover for a smaller amount.

My two cents

[BaCkSeAtDrIVeR]

Originally Posted by carboy

These are all stupid thumb rules which were most probably spread by the insurance industry.

Sort of like how the diamond industry managed to spread the thumb rule in the US that your engagement ring should cost twice or thrice your monthly income.

I can imagine an insurance figure which is calculated based on your monthly income, but basing it on your income is ridiculous & most probably a thumb rule devised by someone who benefits from it.

OTOH, if that amount is invested in safe govt. bonds (7 to 8 % returns), the returns for that value represents your current income. I feel that is a fairly accurate method of putting a price on the financial value of a life insured from the dependants' POV.

[carboy]

Originally Posted by BaCkSeAtDrIVeR

OTOH, if that amount is invested in safe govt. bonds (7 to 8 % returns), the returns for that value represents your current income. I feel that is a fairly accurate method of putting a price on the financial value of a life insured from the dependants' POV.

Only if your current savings is 0!!! If you have current savings, that can also be invested in safe govt bonds to get 7 to 8% returns.
Plus currently your whole income isn't expenditure. Insurance probably needs to based on expenditure rather than income.
Plus you need to reduce the expenditure assuming one person in the family is less.

[amitk26]

Originally Posted by BaCkSeAtDrIVeR

One thing which has me ticked off is the reluctance of Life insurers to provide pure play term life insurance (only insurance, no savings). This is

Every company has couple of term plans atleast but the agents and also development manager /unit manager is reluctant to sell them.

The reason is very clear Agent gets nearly 25% of premium as commission , Unit manager around 10% and commissions are distributed in a near pyramid structure all the way up to regional manager in reducing percentages as top level guy has so many branches reporting to him. For term plans premium is fraction of endowment plans so no one wants to waste his time selling one.

I think best way for companies to sell term plan is online without any agent.


An interesting fact about health insurance , PSU insurers wee up in arms against private hospitals but today I got to know that Sri Jayadeva Institute of Cardiology which is government owned autonomous institute and one of the best in field is not a network hospital of New India Insurance. Others like Fortis , Appolo and even Manipal in Bangalore are still in list for group insurance for my company employees.

In Manipal and Sagar hospitals in Bangalore for parents just 70% will be reimbursed and up to 80% in other hospitals.

For some strange reasons PSU insurers prefer hospitals which milk them dry and avoid government institute. After so much of hoopla about loss making health insurance. The burdon is passed to customer to extent of 20% - 30% of expense for dependent parents which is most likely group to avail claims.

[BaCkSeAtDrIVeR]

amitk, for the 20/30% you spend from your pocket at the private hospitals, you will get far better treatment at the Govt. hospitals. Why take Medical insurance at all?

<grin>

carboy, it not just about level of savings or number of persons in a family; it is also about quality of life. Remember that once your income is capitalised, there would be no more increments, pay hikes and extra bonuses coming their way, while cost of living keeps on rising.

Reg pure term insurance, even when the proposer approached the insurance cos, they are very sloooow in processing the policy. So, it is not just about commissions. Also, the commissions remain only for initial 3 years.

[RaguHolla]

Dear BHPians,

I have unique situation, need your assistance.

Few month ago one of my dear friend passed away in young age (34y), leaving wife and son behind. Now his son is only 3 years old! His wife is house wife he is only earner in his family! We friends decided to step in and help them anyway we can. We decided to set-up fund to friends child education. Friends, colleagues, classmates contributed. Now we have considerable fund.

Our problem stars now. We don't want to handover amount as it is, as we wanted this fund to be helpful in his child education. None of us know what is the best way to invest this amount, that takes care of child future!

Please let me know how best we can invest, insurance, Bonds, FD? If they have to multiple, what percentage is better. Request you to pour in your thoughts.

[carboy]

Originally Posted by BaCkSeAtDrIVeR

carboy, it not just about level of savings or number of persons in a family; it is also about quality of life. Remember that once your income is capitalised, there would be no more increments, pay hikes and extra bonuses coming their way, while cost of living keeps on rising.

Sure, I agree.

What i am arguing against here is a creating of a thumb rule (100 times your monthly income) which works.

There are far too many variables in the equation for a simple thumb rule to work for even a majority of people.
The variables being
- The current savings of the person who died.
- The monthly expenditure
- Expenditure decrease because of the death of 1 person in the family.

For each person/each family, all these and possibly more parameters are different. Which is why each person/family's insurance needs would be different.