Say Chess!

Life Insurance: Investment or Insurance?

(This is the part where I "insure" myself against future lawsuits by disclosing, I am NOT a certified financial advisor, CFA, CA or formally educated in financial matters. My insights into these topics come from my own life experience and may be coloured by my limited ability to make sense of returns projections and legalese. So take everything below with a pinch of salt and make a mental note to check with somebody more qualified.)

Let's take a look at the dictionary definition of insurance:
an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium
So simply put. it is an "I-pay-you-some-money-and-you-cover-my-ass" situation with very specific terms and conditions for when said ass would be covered. Doesn't sound like textbook investment to me:
put (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.
It depends on how one prioritises the life in "life insurance" over the "investment" that is tacked on by the insurance hawkers.  Sexagenarians and septuagenarians, who have taken up the mantle of selling insurance ("Because one can never be insured enough!") after retirement have approached me with these ideas:
  • Money-back plans - "Just don't die for another 20 years, and you get all the premium you paid back in full, and you may even get a 100% bonus - survivors benefit!"
  • ULIPs - "Your insurance company takes your premiums and links it to a investment portfolio, you get some units and if the portfolio goes up, you make money and you can cash out after the lock-in period!"
  • Double-or-nothing plans - "Pay your premium for 20 years and you get 100% return on your money." This is something achievable with a regular FD/term deposit in half the time. You can figure this out for yourself by following the Rule of 72
No matter what the plan, as an investor who tends to be risk-averse, the math has always sounded a bit iffy to me, no matter the personal charms of the pusher. It's left me wondering why do insurance companies think people will go for these plans over something like a basic term insurance plan which doesn't have a lot of fancy interest tables, riders or time tables (0-5 years, 5-10 years and so on forever).

I don't want to go on and about this. But here are a few questions you should ask yourself before you go in an "Investment Insurance Policy":
  1. What is the ROI at the end of the policy term? This is the part where you get your compound interest calculators out and do the math. This is the hard part.
  2. How does the ROI compare to that of a standard term deposit with a leading, financially stable banking or financial services institution at the end of the policy term? Again, more math may be needed here (unless you're one of those gifted ones, who can do it all in their head). You need to assume that you would get the same fixed rate of interest for the entire duration of the policy term, which is a little unreasonable under the present circumstances. If the answer to 1 is lesser than the answer to 2, then you may be better off not investing in that policy.
  3. Would the lump sum benefit be enough to maintain (not improve) your lifestyle and/or those of the beneficiaries under the policy? Again, you need to sit down with pen and paper and work out how long the money would last you/your family with your current lifestyle and it's expenses and discretionary spending. Calculate the monthly outflow of funds from your account and divide by 12. We will call this number A. Divide the benefit amount by A and you will be able to answer: how long is the money going to last?
  4. Are there any side-benefits to investing in an insurance policy? The Indian Govt offers tax exemptions for the premium amount under section 80C of the tax code. But again, this only makes sense if you have a lot of taxable income and can afford to spend the money to get insured.
  5. What about a no-frills simple insurance plan? Plenty of insurance comparison services like PolicyBazaar.comPolicyX, CoverFox that can help you get an idea of how much these things cost. The term-life insurance with no additional riders are the best deals. And the younger you enter into the agreement, the lower the premium over time. I started at the age of 25 and have been paying every year since. Don't forget to update your beneficiaries once you have a life changing event (marriage for one).
Insurance: It is what it is: nothing more, nothing less. Just don't get taken for a ride on the riders and stick to the term-life no-frills policies.

From the Archive: Reviewing The Nokia X1-01

Nokia X1-01 (Red)
Like scrubbing through tracks? Not an option.
Quick question: if your workplace has a no-cameraphone policy, what do you do? Do you stow the smartphone that you paid INR 30,000 for down your pants, hoping nobody conducts a strip search, or do you get one of those cheapo phones that for Rs. 1000/- and quell the itch to check your twitter or post photos of your pedicure-needs?

Actually, you should be doing all that. Except you could put in a 32 GB microSD card and listen to some tunes while your workday breezes by. The Nokia X1-01 is a DUAL SIM phone, provides an MP3 player, support for upto 32 GB of expandable memory, and the rest of the features that come with a basic phone, texts and calls and what not.

What's there to like about this?
It has a Bl-5J battery that has a capacity of about 1440 mAh. That's on par and even better than most smartphones out there. To put this in perspective, the iPhone has a 1450 mAh capacity battery, except it has a lot of bells and whistles that drain the battery much faster. This has dual SIM Standby, it allows you to play music for about 10+ hours non-stop.

This is where I got off the thought train back in 2013.  The last I remember of the phone is feeling the empty pocket where it once used to rest. It had fallen out on my commute to work. Motorbike. Traffic. Jeans that too snugly over my  hips. Not very difficult for a curvy, plastic clamshell to slip out unnoticed.

I felt bad of course, and I swore myself off phones for an eternity that dragged on for a week. Desperate pleas from family and friends left me with no option but to go back to the pawnbrokers, my broken promise and pride the only pledge I could make.

I remember the phone being extremely durable. On one other occasion it actually fell out of my pocket, while I was in-transit, via motorbike. Since I was not going too fast I was able to detect the change in pocket real-estate, pull over and retrieve it, heart pounding, not worrying about the fate of the phone, but about what my fate would be in Bengaluru's famous morning rush-hour traffic, but because I was dodging morning rush hour traffic, while hoping it was not too late. Ultimately, the screen was cracked in a corner, and the back plate was a bit scratched up. Everything else was in its place. I think a bike went over the phone and it still continued to function as before.

I think this is the Tom Cruise in Mission Impossible of phones: predictable, efficient, and gives you exactly what you can expect from a Nokia phone. And oh yeah, it runs forever. I remember getting through 2 days of work in a single charge at one point. It's been discontinued now, but I'm sure somebody is still out here holding out for somebody like you, looking for retro-tech or a suspiciously basic burner phone.

You could always check here to see if one is available.

The Girl Who Played With His Desire

A long-forgotten but not-yet deleted post from two years ago:

Reading The Girl Who Played With Fire right now.  I'm not yet halfway through the book, but here's what happened on one of those staring-into-space moments between chapters:

There once was a Girl,
Who played with fire,
And there once was a Boy,
Who did all He could,
To suppress His heart's desire:
The Girl Who Played With Fire

But one day, He could take it longer,
He confessed to Her, and She said,
Oh, You're such a god awful liar,
You deserve to be  spanked,
While roasting on a spit, above your own funeral pyre,
While the townsfolk vent upon you their ire,

And may your soul ascend ever so higher and higher,
Higher than the astronauts, and the cosmonauts before them,
The juggernauts of industry and space and time,
The haves and the have-nots,
The wipsy forgotten forget-me-nots,
The He-loves-me-He-loves-me-nots.

And how does it all end? He asked.
What does it matter? Said She.
You'll be Above,  I down below,
Waiting for Your rain to descend,
And leave my soul cleansed.

And That is how it must end.

Heavy thoughts. Maybe it's the flu I'm battling pulling my imagination strings.
Here's a ditty that will help take my mind off things weightier issues (like my weight :) ):

What's In A Poem?

It's only words
What one makes of it
Might as well be up to the birds
As long as I ask myself "For this life, what have I to show?"
I Hope. I Think. I Know.

Friday Lay

I gotta have a lay
In the sand
Warm and dry like the land
Mother Earth's hand 
Closes upon me like a vice
I feel nothing to despise.

Fashion Is Not My Passion

Fashion seems pointless
Why does anybody care 
This cut, that fabric, that dress
Covers up what was once truthful and bare
Layers of apparent meaning infused through division
Branding and pleated infusion
You choose between La Moda heels and Jimmy Choo flats
I'm choosing one of De Bono's Thinking Hats.

Transformation Leakage

Optimus Prine always has time
Saving the world from 9 to 9
And a overall cool dude
The rest of the time.