Hornmerchant's BLOG

Recently, someone asked me a few questions about term life insurance in a specific situation. I’ve summarised our discussion below because many people have similar doubts, and the conversation highlights some useful general insights on how to think about life insurance. Questions I am a senior executive at an MNC, 58 years old, with an official retirement age of 65. I am purchasing an apartment worth ₹3 crore and taking a home loan of ₹2 crore, which the bank has approved with a 7-year tenure. The bank manager is insisting that I purchase a term life insurance policy linked to the home loan. My questions are: Is such home-loan-linked term insurance mandatory? Should I buy a term plan at this age, considering the high premium and the fact that my existing investments & assets are sufficient to cover the loan if something happens to me? Answers 1. Is home-loan-linked term insurance mandatory? Generally, it is not mandatory , and often not advisable to buy the bundled home-lo...

There are two types of self-serving Insurance intermediaries – Online Portals and Insurance “Salesmen”. Each of these are broadly of two types again. Two types of Online Portals are – Aggregators, earning referral fees and Brokers earning commissions. Online portals are too focused on conversions and quick sales than understanding the customer needs, educating the customer etc.; well online portals are not built for that kind of high-touch & personalized engagements. Then, two types of Salesmen are – Sales Staff of Banks or Sales Executives, earning incentives, lured by pay hikes/promotions and Individual Insurance agents earning commissions, lured by foreign trips etc. These salesmen too are too focused on achieving their personal sales numbers than what is best for the customers. A disclaimer to clear any smallest doubt – No, I don’t mean all of them are same; not all are bad. Then there are media houses, bloggers, vloggers, influencers earning th r ough ads or/and referral f...

Few days ago I’ve posted a short article titled “ Lifeand Health Insurance – The Right Way to Look At ” . You may also relate this to the post “ Use,Abuse and Misuse of  Life Insurance ” This one may be considered a continuation and slight detailing about Life Insurance, with extension to Personal Accident Insurance. With the above articles you know, you should buy Term Life Insurance. While buying the term insurance most policies offer riders. Riders are ‘Add-ons’ that can be bought along with base cover. Riders offered may differ one to other insurer and plan. Most common are ‘Accidental Death Benefit’, ‘Accidental Disability’ and ‘Critical Illness’. Before I elaborate on the riders, let me describe amount the optimum cover for base life cover. There are methods of calculating the exact amount of Life Cover you need – The Income Replacement Method and Human Life Value (HLV). These methods may be a bit complicated for layman. For simplicity, you may use thumb-rule met...