The insurance business in India isn’t just growing, but it is 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.
What are the various options of liquidity available in the insurance plans sold by various companies?
Insurance products, irrespective of their type, offer liquidity with various features and benefits. While the unit-linked products offer liquidity with their feature of partial withdrawals, the traditional endowment products offer loan facilities against the policy. The traditional money-back policies do anyway provide liquidity with predetermined and regular payouts. It is important for you do decide upon the quantum and type of liquidity that you desire in your insurance product and then choose one accordingly.
I had purchased an endowment plan five years ago with a premium of Rs15,000 per annum. Two years ago, I purchased a house worth Rs30 lakh by taking a loan and last year, we have been blessed with a child. How should I go about buying further insurance?
Financial planning is a continuous process and it is advisable that you perform a complete financial planning exercise on an annual basis. For your current lifestage and circumstances, a two-step plan is advisable.
First, you should purchase life insurance to cover the liability of the loan that you have taken for your house. There are many products that specifically provide cover for housing loans. These are available in various options of single and regular premium payment, and you can choose one depending on the premium you would like to pay for this. These products are relatively less expensive, as they provide only insurance covers without any savings component.
Second, you should start investing for your child’s future. You can consider purchasing one from the various children’s plans. It is always wise to start planning early for your child’s future, as it ensures that you give your investments more time to grow and thus you would also be required to invest lesser amounts.
This week’s expert is Rajesh Relan, managing director, MetLife.
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.