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 and A on insurance every Monday.
I am a 30-year-old married male earning about Rs10 lakh per annum. I have one whole life policy, two term policies and am also planning to invest in pension. Do you think I need to make any further additional investments in insurance? Or do you feel that I am over-insured and need to surrender one of the policies?
Insurance needs are specific to each individual, depending on his financial responsibilities and liabilities pre- as well as post-retirement.
Many recommend that you purchase insurance protection worth 5-10 times your current annual income.
This is an old thumb rule that doesn’t take into consideration current assets and any special needs you and your family may have.
You may want to start by determining the amount of income that you would like to replace and the number of years you need to replace this income.
In addition, you may want to consider funding future expenses such as college education, retirement and any special needs your children or family members may have.
Insurance plans are an ideal way of building up these funds, and the general rule is, the earlier you start the better.
How often are portfolios disclosed for unit-linked policies?
One of the main reasons for the increasing popularity of unit-linked products are that they are transparent. Most insurance companies send regular updates on the fund performance to the customers. Further, a customer can track the value of his investments on a daily basis as the net asset value, or the the value of the assets less the value of liabilities, is published in leading dailies and on the websites of the companies.
Readers are welcome to write in with their queries to email@example.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Bert Paterson, managing director, Aviva India.