I have five traditional policies for which I pay a premium of 1.10 lakh per annum. From the returns point of view, should I continue paying for these policies or discontinue some of them and invest elsewhere?

-Chetan Chavan

Traditional policies are insurance products that combine the elements of investment and protection. These plans are designed for people who are risk averse and deliver conservative returns. You need to revisit the product brochures and illustrations and ask yourself some questions. Do these policies give you adequate life cover to provide a financial cushion in your absence? If you have other investments in riskier assets, are you satisfied with having safe, but less, returns on these policies that balance your portfolio? Do you think the charges of surrendering the policies before maturity are high and something you aren’t comfortable paying? If you marked “yes" to the latter two questions, don’t surrender these policies.

In fact, if you marked a “no" to the first question, take a term insurance that covers you and your family adequately for future financial liabilities.

I am 55 years old. I had taken a policy in 2006. I paid premiums only for the initial four years. In fact, one of their representatives advised me to discontinue with the premium and examine alternative options. Should I redeem the policy and invest the same somewhere else.

-Pradeep Padmanabhan

It seems that you have bought a unit-linked insurance plan. Since the cost of such policies is usually recovered in the initial five-six years through various charges, I will suggest that you reinstate the policy and continue it till the original policy term to optimize your investment returns. Redeeming the policy will be a loss-making proposition and considering your age, buying another life insurance policy, too, would be costly due to higher mortality charges.

I am 26 years old and want to take a term insurance of 1 crore. What will be the premium amount? What riders come with term covers?

-Ankit Sanghvi

There are two kinds of term insurance plans available in the market based on where you buy them from—normal term plans bought from traditional sources such as agents and online term plans purchased from company websites. Online term plans are cheaper than normal term plans. For your age and a 20-year term, the annual premium will be in the range of 8,000-13000.

In a normal term plan, you have the option to select riders, such as accidental death benefit, critical illness and disability covers. You will be charged separately for these. Online term plans, typically, do not offer rider options.

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