Why you shouldn't have 'fill it, shut it, forget it' approach to life insurance
V Viswanand May 8, 2019
Riding high on the back of a fuel dazed economy, when Hero Honda unveiled its four stroke bike in the mid-eighties, the craze over its iconic "Fill it, shut it, forget it" tagline was almost at par with the product launched. More than three decades later, consumers still continue to admire the campaign every time the brands takes a fresh spin at it.
As a novice manager back in the day, I too remember having witnessed the impact of a brand-line as simple as that and wonder if what's good for the goose, is really good for the gander? While the philosophy worked wonders for the motorcycle company, it certainly would never hold true in the case of life insurance. This principle got me thinking of my school days, when my parents would insist on "revisions" of chapters studied, and not just "study, test and forget".
When it comes to life insurance policies, most customers invest significant amount of time and effort in researching online, meeting prospective sellers, and deliberating upon the various products to decide the most suitable offering. Having said that, there is a large number of consumers who, upon policy purchase, do not even open the policy pack, while robotically paying renewal premiums year on year.
In order to explore exponential potential of their life insurance products, it is important for policyholders to depart from this 'fill it, shut it, forget it' approach, addressing key opportunities such as those mentioned below.
1) Let riders enhance the protection your life insurance policy provides
First and foremost, it is crucial to understand that life insurance isn't just about life and death. Riders are an intrinsic element that are also key to yielding the best returns to your life insurance policy. Simply put, riders are a tool to customise and maximise the benefits of your life insurance policy by enhancing the protection value. The most common riders are accidental death and dismemberment rider, critical illness rider, waiver of premium rider, family income benefit rider, child benefit rider etc. addressing several kinds of insurance covers, thereby adequately shielding you and your family over the course of life.
2) Your life insurance policy can provide liquidity
As surprising as that may sound, your life insurance policy can provide you liquidity in times of financial need. Your life insurer, at a nominal loan processing fee, can provide you a loan against your policy corpus, taking into consideration the type of policy and its surrender value. This option is, however, generally available only on traditional endowment policies, not on term insurance or other ULIPs that invest in equities. However, in case of ULIPs, partial withdrawal of account value is allowed to meet your immediate needs.
3) Tailor your policy to match changing life stages and needs
Life insurance provides an array of products that can cater to varied life stage needs. As the needs and life goals of someone single in his 20's could be vastly different to someone in his 40's, married, with two children and dependent retired parents, so would be the life insurance solutions to help cater to these life goals. For instance, in your mid-20s wealth accumulation is a primary concern which can effectively be addressed by Unit Linked Insurance Plans providing dual benefit of insurance and wealth creation, helping grow assets that you can use in the future. Similarly, as a newly married individual or someone looking to start a family, a term insurance policy ensuring financial security of the family in the long run, will be the best option. It is hence important to identify your life goals and then purchase a policy that protects those goals and helps achieve them in a financially prudent manner. As your life stages evolve, you must reevaluate if your existing life insurance policies are meeting your new life goals (like a child's education for example) and take on new policies to meet these new goals.
4) For benefit of beneficiary, you may change the nominee with varying life events
Many of us consider nomination just another tedious element making our life insurance policies drearier. However, proper nomination is crucial to ensure that your loved ones get the benefits promised by the policy in actual need of the hour. From parents to spouse at the time of marriage, to dividing it among two kids at the birth of your second child, did you know that you have the flexibility to change your life insurance nominees with varying life events? It is recommended to regularly assess your nominee's scope of modification to enable quicker processing of claims and lesser dispute/hassle during settlement.
So, don't even wait for the next time when you will open your locker to review your policy. Just do it today and let your family and life's goals be protected in a financially secure way!
(The author is Deputy Managing Director, Max Life Insurance)