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 a 25-year-old man and I have no dependents currently. I am also in good health. Is there any advantage in my buying insurance now?
Yes, there are advantages of 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 the insurance premium amount. At a younger age, you would be physically sound and not likely to suffer from illnesses. This would entitle you to a lower premium on the policy. Thus, it is advisable to start early and stay invested to benefit from not only lower premiums but also what Albert Einstein reportedly referred to as the eighth wonder of the world—power of compounding.
I am 40 years old 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 the 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.
I am 35 years old. I am already paying premium for a term plan for the last 10 years. Does the type of plan an individual should purchase change with one’s life stage?
In order to be confident that a product is suitable for an individual, it is advisable to understand clearly how the suggested product fits in with one’s needs.
The life insurance need will change with the life stage, from starting to work to enjoying your golden years and all the stages in between. Each one of these stages may pose a different insurance need for you.
Products which may be suitable for protection needs are term or whole life insurance with riders like critical illness, Waiver of Premium (WoP) or ADB (accidental death benefit). For needs like saving for children’s education, marriage and/or getting them settled, endowment, money back and whole life plans may be suitable.
One could consider single pay/short pay pensions or immediate annuities for retirement need to create a sufficient corpus. A guaranteed monthly income plan can also be considered for such a need.
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 Rajesh Relan, managing director, MetLife