Let’s face the facts, its like we all blame TV, mobile phones. The problem lies not with TV or mobile phones but the way we use them.
Similarly INSURANCE, is a good product but the brokers are hell bent on getting high commissions and only selling products with high commission.
For example, If 28 year old youth can get a term plan of 1 crore for 10k till the age of 75 why do you have to sell him a plan of 5 lacs with a premium of 35k per annum. Agreed in case of LIC the premium is given back to the customer after the maturity of the plan but is 5 lacs sufficient for your dependents.
But out of that 35k premium from LIC, if I invest 10k in a term plan from other insurers, i have remaining 25k and I can invest in other instruments like FD, mutual funds, gold, silver, ETF, chit funds etc and I would have made more money than 5 lacs sum assured from LIC.
For eg: I have 50k per month.
LIC plan – Roughly for a 30 year old male, non smoker will get a coverage of 50 lakhs. So after maturity I will get whatever premium I paid with some bonus or interest on the premium paid. Offcourse, my coverage will continue for the rest of my life. In short LIC plans are endowment plans which are equal to fixed deposits, or market linked which are equal to mutual funds or non linked plans equal to pure insurance plans with some profit.
Offcourse, some market linked LIC plans are good and you need not even pay the premium after certain years but for that the plan has to really do well which is again highly difficult because of the high fund management charges, plus the life cover and assured returns provided on the plans.
So if you want good coverage and just about decent returns in the worst case, you can go for LIC. But considering current rate of inflation and future cost of living, these plans will have to return really high in which the probability is high.
Moral of the story – never mix investment and insurance.
Insurance should purely cover your family or dependants and give a GOOD financial security for some years atleast.
Now imagine out of 50k i invest 10 in a term plan of 1 crore from a other or private players. Remaining 40k i can invest and make better returns with just SIP in mutual funds or even FD, etc.
LIC does have a slightly better option, LIC has launched a term plan as well but costs 20k roughly for 1 crore while private players charge less than 10k. Offcourse, LIC is a better brand but I am okay to buy from good reputed private players as well with some research.
Agreed, LIC is a good company but they need to change and give better plans.
It will still take some time but private players are already started eating into LIC’s monopoly. LIC still has time, resource and trust to maintain their market monopoly but not for long with this kind of lethargic attitude.
Agreed they have the best settlement ratio, good customer service but there are private players who offer equally good services at lower premiums. Remember what happened to Nokia.
My suggestion LIC plans are good for people who are having good source of higher income, well settled and are just happy with decent returns without too much risk.
But again, if you can get better returns being a little wise..its upto you..Afterall imagine from where does LIC gets the profits to give you. Their fund managers must be similarly doing the same.
My advice, will not suit everyone nor I am against LIC, nor I am insurance agent or will be in the future, but at those who are looking at alternative options.