How I bought my cell phone and insurance

Buying life insurance heralds the beginning of adulthood. It is the first milestone in the direction of thinking about your own mortality.

Who wants to do that at 26? All you are thinking about, then, is the next mobile phone you can buy.

But since I was planning a short trip down the aisle, I was forced to relinquish my 'youth' and start thinking responsibly.

I needed insurance but didn't have a clue where to start. Getting life insurance is more complex, number-crunching, mind-boggling than a simple mobile phone.

Might be easier to give it all to a financial planner, I thought. Not so, my friend told me tartly. It is simple common sense. Apply the same formula that helped you buy that mobile phone, my friend said.

I asked myself three questions. Maybe you could ask yourself the same, too.

What can I afford?

One of life's inescapable truths: budgets are the starting point of pretty much everything. When it comes to life insurance, figure out how much premium you can afford.

My financial profile: I was 26, single and without debts or loans. My premiums, then, would be pretty low. Nonetheless, I did plan to have a family some day. I might take a loan to buy a home.

My decision: I figured I would start with a cover of about Rs 20 lakh and increase it later as my obligations grew.

Take a cue: If you have a family, consider loans that could devolve on your family should anything happen to you. You would need to buy insurance to cover your liabilities and provide a stable monthly income for your family for the rest of their lives. If you have a young child, you need to account for the cost of your child's education.

What features do I need?

Mobile phones come with everything from Outlook Express compatibility to a 3.2 mega-pixel camera. The question is: what do I really need?

My insurance need: High cover by paying the lowest possible premium.

My options: I had already had words like Unit Linked Insurance Plans, endowments and whole life plans thrown at me by advertisements and agents. I had no clue what they were talking about.

These were insurance plans with an added component of investment. They were more expensive for the twin job they performed.

For example, a premium of Rs 10,000 every year would get me an insurance cover of anywhere between Rs 1 lakh and Rs 5 lakh (Rs 100,000 and Rs 500,000). This meant I would have to pay a premium of Rs 40,000 every year to reach my Rs 2 million target!

Part of the premium would buy me cover; the remaining would be invested in a fund which promised me great returns.

Did I want that? No! I just wanted simple insurance, none of this investment or tax stuff. For those, I would explore other investment options first.

My choice: Then I came across something called a term policy that gave me my Rs 20 lakh cover for an annual premium of Rs 6,000. No investment, no returns. Just insurance.

Whom do I trust?

This is tough. We are likely to have been led astray by wonderfully sentimental advertising that insurance companies indulge in.

Get down to facts. Your choice could be governed by positive word of mouth, network strength, strong customer service and more such reasons.

I wanted to be sure of service if I moved to any city in the future. So I went for maximum reach. I chose a company that had a good branch network so that I would get my policy serviced wherever I was.

My policy, my premium and insurance partner all sorted out, I was ready for that walk down the aisle as a responsible adult.

But allow me to let you in on a little secret. The mobile phone I bought was flashy, expensive and came loaded with features that I still don't fully understand!

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