I took a life insurance policy for my daughter but I would not be able to continue it for some reason and will have to withdraw the money. Please suggest a suitable life insurance policy for my 12-year-old daughter. Is it better to opt for an endowment or a money-back policy?

—Chikita Kumar

There are a number of child plans available in the market. However, like all goal-oriented insurance plans, the earlier you start the better it is for you. Since your daughter is already 12, to accumulate a meaningful corpus for her may require a larger annual premium. Apart from traditional endowment and money-back plans, also consider a unit-linked insurance child plan most of which come with triple benefit in case of a mishap.

I have a life insurance with a sum assured of 5 lakh. My family includes my mother, wife and son. Do I need to take insurance for all members? How many covers should one have?

—Geeta Jain

It is very difficult to answer the question with the facts that you have provided. However, if you are the only earning member, then it is sufficient for you alone to have a life insurance policy. If your wife works as well, then she could consider taking a life insurance policy in her name.

As for the second part of the question, I presume you are asking how much insurance one should have. As a thumb rule, this should be 8-10 times your annual salary depending on your other liabilities, such as a home loan. It is best to contact a financial adviser to help you calculate the right quantum of insurance.

I have found that the premium amount increases drastically if the sum assured is more than a certain limit. In such a case, would it be beneficial to take different term plans with small sums assured from different companies which when added can cater to one’s need? Would I be able to save on the total premium this way?

—Aman Bhatia

If you are talking about term plans that provide protection cover for life, the premium actually tends to decrease as the sum assured increases. As the sum assured increases the medical tests that you have to undergo may become more stringent. It is best to buy a single term policy for the consolidated amount that you want to get insured for as this will be more economical and will be more convenient in case there is a claim on the policy.

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