I want to invest in a child insurance plan to take care of my son. Can you suggest few suitable plans? What will be the premium? I will need about ₹1.5 crore in 15 years.
To secure your child’s future, you should first buy a term life insurance plan. A term plan pays the full sum assured to the nominee in case the insured dies. A minor can be made a nominee with an appointed guardian. A stand-alone term plan is the most economical. It has no maturity value. Death benefit that is coupled with investment in other life insurance plans such as unit-linked insurance plans (Ulips) or endowment plans are harder to analyze as the benefits are combined. Term insurance for a sum assured of ₹1.5 crore for a 35-year-old for a 15-year policy would cost around ₹10,000 per year.
If you are looking for investment returns, then you have products like fixed deposits, mutual funds, savings schemes and insurance endowments to choose from. Endowments can be traditional or unit-linked. The traditional endowments give bonuses each year. The returns for such products tend to be between 4% and 6% as the investments are mostly in government securities. Here, the insurer takes on a large part of the investment risk and, typically, provides stable returns. In Ulips, you can select the underlying investments such as debt or equity or balanced funds. Here, you bear the market fluctuation risk to a much larger extent but the returns can he higher.
Is it possible to include my unmarried sister as a dependant in a life insurance policy? She is not financially dependant on me. How should I do it?
I understand that you want to include your sister as a nominee in your life insurance policy. This is possible. However, to ensure that she receives the insurance amount, you must also execute a Will where you assign her the policy proceeds. In the absence of such a Will, the legal heirs can claim the insurance benefit. If a claim is made, the insurer will pay the amount to the nominee in the policy. By doing so, the insurer will be discharged of its responsibility. However, if such a nominee is not a legal heir, then all the legal heirs retain their right to the insurance claim.
Abhishek Bondia is principal officer and managing director, SecureNow.in.