I am 35 years old and I have a 5-year-old son. My current annual salary is Rs 15 lakh. Which insurance cover should I take?
I suggest you seek the services of a financial planner to evaluate your goals and the means to achieve them. Life insurance should be an important part of this plan. I would suggest you buy a pure term plan with optional accidental, disability and critical illness benefit riders. At your age, your primary goal is to make sure you have a comprehensive risk protection plan. Simply put, you and your family should be adequately protected should you not be able to work as a result of sickness or injury or in case of an untimely demise. These plans are cost effective and offer protection against death (natural and accidental), disability and critical illnesses. A term cover of 8-10 times your annual income should be adequate. Besides this, there are other insurance products which can help you plan systematically towards a life goal such as your son’s education or your retirement.
I am 28 years old and I have two insurance policies. In one policy, which is a unit-linked insurance plan (Ulip), my half-yearly premium is Rs 5,495 for a sum assured of Rs 4 lakh, including a term rider. For the other policy, which is a whole-life policy, I pay a quarterly premium of Rs 14,990 for a sum assured of Rs 18.80 lakh. Have I chosen the right plans? I am planning to buy a term insurance for Rs 50 lakh as I will be getting married next year. Should I buy a term policy online?
I hope you had a financial plan charted out when you purchased these policies. If you didn’t, you still have time to put together a financial plan with or without assistance. In the Ulip you have bought, the fund value will depend on the equity market performance. The market has been bearish over the last 12 months and it reflects in the performance of your fund. If you aren’t in need of immediate capital, I would advise you to continue with the plan and take a long-term view. Short-term volatility shouldn’t take you away from your long-term goals. Also, there will be surrender charges, which may hurt your returns further. A whole-life policy helps create an asset for your loved ones after your death.
I would have advised you to purchase a term plan first. It isn’t too late. Go for a a pure term plan that offers you income protection, safeguards your family and takes care of your liabilities in case of an untimely demise. As you are young, it is advisable to go for the maximum term possible and risk cover based on your current liabilities and income level. I would suggest a cover 8-10 times your annual income. Online term plans are cost effective. I suggest you evaluate all the online term plans offered in the market and base your decision not only on the rates offered but also on the claim settlement history, service quality and the brand of the insurance company.
Amitabh Chaudhry MD & CEO, HDFC Standard Life Insurance Co. Ltd
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