Most plans pay 100% claim for permanent total disability

  • In case of partial disability, such as loss of an eye, the sum assured payable could be in the range of 5-50%
  • A thumb rule is to take a cover equal to 10 times your annual income

I have a car loan (Rs. 8 lakh) and a home loan (Rs. 40 lakh). What kind of life insurance plan should I take to ensure my loan burden is taken care of if something were to happen to me? What are the premiums like? Also, if I take a disability health insurance, will it cover my loan EMIs in case I am not able to work temporarily or permanently? Please advise how I should adequately insure myself?

—Jeevan Shah

You should take a standard term insurance cover with a sum assured of Rs.1 crore or more. Choose a lump sum benefit option. Under this option, the nominee gets the full sum assured at one go. This amount can be used to settle outstanding loans. The excess could be used for the nominee’s welfare. A thumb rule is to take a cover equal to 10 times your annual income. The sum assured should be enhanced to cover known financial liabilities.

You may also assign the policy in favour of the lending institution. Then, the proceeds from the policy would be paid to the lender directly.

Premiums in a term plan depend on the sum assured, term of the plan and age of the insured. It is advisable to maintain coverage at least till the age of 60. This covers the individual’s prime working age. In case of early death of the insured, dependants can use the proceeds from the policy to sustain themselves. For a 35-year-old to maintain coverage for 25 years, the plan will cost about Rs. 9,000 for a sum assured of Rs. 1 crore.

A disability insurance is commonly known as personal accident insurance. This policy covers accidental death and disability of the insured. Natural death and medical illnesses are not covered.

Disability could be either total or partial, and could be either permanent or temporary. If the person meets with an accident and suffers a disability, the specified sum assured is paid out. Most plans pay 100% of the sum assured in case of permanent total disability, such as loss of both limbs. In case of partial disability, such as loss of an eye, the sum assured payable could be in the range of 5-50%.

In case of a temporary total disability, where the person is bedridden, a weekly allowance to compensate for loss of income is paid. You could use this claim amount to cover your EMI. A Rs. 50 lakh personal accident insurance costs about Rs. 11,000 per year. You should first buy a term insurance, and then purchase a personal accident insurance.

I have a family floater plan that covers me, my wife and two children. I am getting divorced now and am not required to legally provide any money to my wife. But I still want to cover my soon-to-be-former-wife and children under the plan. Can a former wife be covered under a family floater? Will I have to inform my insurer? Please explain the procedure.

—Name withheld on request

In a standard family floater health insurance, you can cover your spouse and children. Some companies allow cover for parents and grandparents as well. When children cross the threshold age, which varies by plan and is generally between 18 and 25 years, you have to migrate them to a separate plan. The waiting period accrued in the family floater plan can be transferred to the individual plan.

For your spouse, it is possible to port her health coverage from the family floater to an individual plan. She can carry the waiting period accrued in the earlier plan into the new plan and be independent of the family floater.

Abhishek Bondia is principal officer and MD, SecureNow.in. Queries and views at mintmoney@livemint.com

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