Last Update – 22 Jan 2020.
I am your well-wisher and I will never give you the wrong advice. This is the best policy to protect your family’s future. Trust me.
These are some flattery lines used by insurance agents to show their concern towards you. Your welfare is not their sole purpose. Their primary purpose is the commission they get in return for selling you an insurance plan.
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My experience with a LIC agent
Once I went to the LIC office to know about the LIC policies. The agent tried his best to convince me to take an endowment plan. Because the commission on the endowment plan was the highest.
That agent used every marketing technique to sell me the insurance policy. But I Came back without buying any policy. The agent called me many times every day for almost one month to convince me.
Let see the rewards behind his hardcore efforts.
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Endowment Plan LIC Agent Commission 2020
|Premium Paying Term||Commission 1st Year||Commission in 2nd & 3rd year||4th year onwards|
|2 to 4 yrs||5%||2.25%||2.25%|
|5 to 9 yrs||10%||5%||5%|
|10 to 14 yrs||20%||7.5%||5%|
|15 yrs & above||25%||7.5%||5%|
I think you get a clear reason. Have a look at the commission on other plans also.
LIC Agent Commission on Children Plans 2020
|Premium Paying Term||Commission 1st Year||Commission From 2nd year onwards|
|2 to 4 yr||5%||2%|
|5 to 9 yr||7.5%||5%|
|More than 9 yr||10%||5%|
LIC Agent Commission on Money Back Plans 2020
|Premium Paying Term||Commission 1st Year||Commission From 2nd & 3rd year||Onward 4th year|
|As per plan||15%||10%||6%|
Agent Commission on Pension Plans
Single-Premium Plan – 2% of single premium
Other than single premium
|Premium Paying Term||Commission 1st Year||Commission From 2nd Year|
|2 to 4 yr||5%||2%|
|More than 4 yr||7.5%||2%|
Let’s take an example. Suppose you buy an endowment plan having a term 20 years with an annual premium of Rs 20,000.
|Year||No. of years||Premium p.a||Commission Rate||Amount|
|2nd & 3rd year||2||20,000||7.5%||3,000|
|From 4 year||17||20,000||5%||17,000|
I am neither against nor in favor of this. My only motive for writing this article is to aware the policy buyer about the commission which the agent earns. So that buyers can take an informed decision while buying a policy.
You should consider the following facts while buying the insurance policy –
- Decide whether the purpose is only insurance or insurance cum investment. For sole insurance, I prefer the term insurance plan.
- If your purpose is an investment, then go for other investment options with better returns.
The agent will try to convince you to buy the plan which would be more beneficial to him (not you).
Don’t trust him blindly. Consider all the facts about the plans and match with your requirements, then decide which plan you should buy.
Factors you should consider while buying life insurance
1. Do You Really Need a Life Insurance
Life insurance is a way to protect the future, who are financially dependent on you. If this is not the case or you have sufficient sources that would take care of their financial needs, then you should further think about this.
2. Purpose of Life Insurance
You have to decide the primary purpose of life insurance, whether this is insurance or the investment. If your purpose is insurance then you should go for a term insurance plan.
In the case of insurance cum investment, you should go for endowment or money back plans. But if you ask my opinion, I would suggest you, go with term insurance and invest the rest of the money into pure investment plans like PPF investment, equity or mutual funds.
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3. Value of Life Coverage
Wisely calculate, how much money would be sufficient for your family to meet their all expenses. Include household expenses, children’s education & marriage expenses and some amount of the medical emergency.
This is not easy to calculate the exact figure but you have to decide an approximate amount of life coverage.
4. Your Present Financial Condition
A regular premium has to pay at regular intervals as per the policy terms. Ask these following questions to yourself.
- How much premium can you pay as per your present financial condition?
- Is the return after maturity will beat inflation?
- Will my family able to survive on the claim amount?
Choose those plans that would not pay any financial burden on your shoulder. If you are not in the condition to bear the high premium of endowment plans then you should buy a term policy.
You may like to read – Best term policies in India.
5. Tenure of Policy
Tenure of the insurance policy also pays a very significant role. The retirement age minus current age is considered as the ideal tenure of the policy.
You can choose the tenure until the age you would fulfill all the financial needs of your family.
6. Select add-on’s wisely
Add-on is a feature of adding some additional services like accidental insurance or health insurance with life insurance. Insurance companies charge additional for providing add-ons.
Sometimes making an add-on becomes more expensive than the two separated plans. So before adding an additional service compare the premium amount with the separated plans.
7. Compare Policies
Life Insurance companies offer a number of policies having different features. Consider all the policies and compare the policy features with your requirement then finalize the one.
In most of the case, the agents try to indulge your decision towards some specific policy because of their personal benefit. Be aware of such a condition.
8. Check Policy Online
Every insurance company provide online buy policy facility and at discounted rates. Selling over online saves the agent commission and bring down the overall cost of the policy.
So always compare the product which agents sold with the online available products.
Always do your math before investing your hard-earned money. Go with a term plan that can handle the monthly bills of your family if you are no more and invest the rest of the money in better return giving assets like mutual funds, sweep accounts, or PPF. For insurance plans, i would prefer to go with online products to save money.
What are your thoughts? Tell me in the comments.