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.
I am 40, and work with a telecom company. I have just signed on for a Rs75 lakh condominium. I am confident I will be able to service the loan. But, what if something happens to me, an accident, a sudden illness, anything?
Your liability increases the moment you sign on a home loan; this makes it necessary for one to take a life insurance plan. This will help ensure your loved ones keep living a respectable life even if something happens to you.
There are two options. Mortgage-reducing term assurance plans are designed to give the borrower a life cover equivalent to the outstanding home loan. The objective is to introduce customized risk protection at an affordable price; they may be convenient in the way they are structured and may be lower in cost. The payment of equated monthly instalments progressively brings down the outstanding loan over the years and the insurance cover also reduces correspondingly. You may also go for a pure term plan for a sum equivalent to the housing loan. Thus, in case of any unforeseen event, you ensure you gift your family a home, not a loan.
I am 26, and I have a term plan with a cover of Rs30 lakh. I want to invest in a life insurance plan that offers savings and returns. How should I choose the best product if I need guarantees?
To choose the appropriate savings-or returns-oriented plan, get an approved illustration from the company sales agent. Check the guaranteed and non-guaranteed components (these have to be illustrated as per regulations). It is important to observe that the illustrations are shown at 6% and 10% (these are the current approved rates). If you wish to be protected from market vagaries and want guaranteed peace of mind, choose the product with the highest guaranteed fund value.
But, as always, let better not be the enemy of good. If you have decided to buy life insurance, go ahead. It is one of the best tools to guarantee your and your family’s happiness.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms. This week’s expert is Rajesh Relan, managing director, MetLife.