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 25, and have no dependents. I am also in good health. Is there any advantage in my buying insurance now?
Yes, there are many and significant advantages in buying a life insurance policy early in life. The premium that you pay on your policy mainly depends on two factors:
your age and the tenure of the policy. The younger you are, the lower is your insurance premium amount. At a younger age, you are likely to be physically sound. This would entitle you to a lower premium on the policy. Thus, it is advisable to start early and stay invested to benefit from mortality savings as well as what Albert Einstein reportedly referred to as the eighth wonder of the world — the power of compounding.
I am 40, and have accumulated a pile of policies that I now want to reduce and maybe replace. Is it possible to do that?
Yes, it is possible, but it is better to weigh the options carefully. You must know that cancelling existing policies may result in some financial loss to you. Before replacing an existing policy, closely compare the two policies on price, guarantee periods, convertibility, financial strength of the insurance companies and available options. Most importantly, do not cancel any existing coverage until the new policy has been approved, paid for and delivered to you.
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.