Ask Mint | A term policy meets protection need only

Ask Mint | A term policy meets protection need only
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First Published: Sun, Jan 04 2009. 11 02 PM IST
Updated: Sun, Jan 04 2009. 11 02 PM IST
The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
Is a term policy more beneficial than a whole life policy?
The decision to purchase either a term or a whole life policy is dependent on your individual needs and requirements. A term policy meets your pure protection need only. In case you have many liabilities and cannot afford to pay a huge premium then a term policy, which is usually low cost, is suitable for you. A whole life policy, by contrast, is a combination of protection and savings. Apart from providing protection, a whole life policy offers you the benefit to withdraw some part of the amount (in case of a Ulip) or take loan against the policy (in case of a traditional plan) depending on your requirements during different stages of life.
My daughter, currently 11 years, has aspirations to go to the US to further her MBA. I have recently purchased a unit-linked whole life policy. Do you think I can withdraw part of my money from my policy to fund her education? Please advise.
Typically, whole life policies are designed to suit your individual requirements and changes as your needs change during your entire life. For your daughter’s education you can withdraw from the accumulated savings of your whole life policy if your policies terms and conditions permit it. In most cases, there is a minimum amount that you need to maintain post-withdrawal to ensure that your policy is operational.
However, as your daughter is only 11 years old, I would advise you to consider investing in a child insurance plan. The objective of a child plan is to ensure that your child’s education does not suffer in case anything unforeseen happens.
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 T.R. Ramachandran, managing director and CEO, Aviva India.
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First Published: Sun, Jan 04 2009. 11 02 PM IST