I am 40-year-old and have recently purchased an apartment worth Rs1 crore. Is there a life insurance plan to insure the home loan? Should I go for it?

Your liability increases the moment you sign on a home loan, which makes it necessary to increase your life insurance cover. There are mortgage-reducing term assurance plans that are designed to give the borrower a life cover equivalent to their outstanding home loan. With such plans, the objective is to introduce customized risk protection at an affordable price. The payment of monthly instalments progressively brings down the outstanding loan over the years and the insurance cover also reduces correspondingly.

I am a 30-year-old man. I bought a money-back life insurance plan, and now I’m considering replacing it. Are there any risks in doing so?

When you buy an insurance policy, you have acted responsibly and in the interests of your family. Hence, it is not advisable to cancel plans that you have already bought.

However, if you do decide to cancel an existing plan, it is better to the weigh the options carefully. You must know that cancelling existing plans may result in some financial loss to you.

Please evaluate the extent of such financial loss and weigh it against additional benefits of replacing it with a new plan. Also, compare the new plans on price, guarantees available, and withdrawal options, and if it is a money-back plan, then the amount and frequency of money back instalments.

Most importantly, do not cancel any existing coverage until the new plan has been approved, paid for and delivered to you.

Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Rajesh Relan, managing director, MetLife India Insurance Co. Pvt. Ltd.