Cover home loan with a term insurance
Home loan insurance policy covers balance amount to be paid
I have a home loan and the possession will be given to me late next year. Should I buy an insurance when the property is under construction? Please explain pros and cons.
—Naval
It is absolutely necessary that you buy a home loan insurance or a term insurance policy as soon as you avail a home loan. If you are the only earning member, it can be a cause of concern for your family after you as they may face severe financial crisis in your absence. A home loan insurance policy covers the balance amount to be paid to the bank.
But in my opinion only taking a home loan insurance is not enough. A home loan insurance will only repay the loan amount, but your family can still find itself in a financial mess. I suggest you go for a term insurance policy instead.
You need to take a term plan which has a sum assured equal to an amount 10 times your annual income plus the amount of loan to be repaid. Thus, if you have an outstanding loan of, say, ₹ 40 lakh and your annual income is ₹ 8 lakh, the ideal term cover for you would be close to ₹ 1.2 crore.
How should I ascertain the cover amount for a family health insurance? I have a family of four including my wife and twin kids aged three.
—Prasun Jha
Health insurance cover amount should depend on four important parameters:
Customer profile: If you prefer going to a large private hospital which has a doctor fee of ₹ 600-800 and hospital room rent of ₹ 3,500-4,500 per night, you should consider a ₹ 5 lakh cover as most companies offer 0.5% to 1% of sum insured as room rent cap.
Number of family members: An individual cover can be of ₹ 2 lakh, but when it comes to family cover it should be at least 1.5 times the amount of individual sum insured, which works out to be ₹ 3 lakh.
The cover amount should also depend on the city where you avail medical treatment as metros and bigger cities are more expensive in terms of treatment compared with smaller towns.
Age of members: The premium increases as age increases and also in a family floater depends on the age of the eldest member.
They are many ways of reducing your premium cost. For example, you can either opt for a ₹ 7 lakh sum insured individual plan at ₹ 9,000 or take a ₹ 3 lakh base mediclaim plan for ₹ 4,200 and take a top-up policy for ₹ 10 lakh for just ₹ 2,000.
Yashish Dahiya is co-founder and CEO, Policybazaar.com
Queries and views at mintmoney@livemint.com
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