I am 38 years old and am planning to take a life insurance policy. However, the premiums seem to be quite high. What should be the ideal premium for someone my age? I have two dependants and my annual salary is ₹ 26 lakh. Kindly also suggest a few policies if possible.
It seems you are looking at investment-oriented life insurance because the premiums for term insurance are low. In term insurance, your nominee will be paid the sum assured only if you die during the policy term. Your premium should be about ₹ 11,000, including GST, for a ₹ 1 crore-sum assured and 20-year term. Given your annual income, you should take a sum assured of about ₹ 2.5-3 crore. It is good to take cover until the age of 60 or 65. This is often the typical retirement age for an individual. Premium for life insurance is dependent on entry age, smoking habits and term of the plan. To lower the premium, you can reduce the plan’s term. Refer to Mint’s “Term plan premiums" to shortlist plans.
I want to take a term plan of ₹ 1 crore or more. What should I look for apart from the premium amount?
While selecting a term plan, you should consider three things. First, go for an insurer that has a claim settlement ratio of at least 90%. Second, consider a regular premium paying product, rather than a single premium payment option. Third, choose a plan with no maturity benefits such as return of premium; these tend to be priced higher.
A general rule of thumb is to take a sum assured that is at least 10 times your annual income. Several term plans offer riders that cover critical illness and disability. If you want additional benefits other than death, go for critical illness rider.
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Abhishek Bondia is principal officer and managing director, SecureNow.in.
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