Readers' Corner: Life Insurance

I am a 30-year-old professional earning Rs 1.2 million a year. I got married two years ago and am thinking of buying a term plan. But I am unable to decide the duration and amount of cover. I am also unsure if term plan will be enough to protect my wife's financial security.

The primary objective of a term plan is to act as an income replacement tool. It eliminates the financial burdens of a family in case of an untimely death of the earning member. Hence, it is always prudent to opt for a term plan until your retirement age. Ideally, it is 60, for which you will need to opt for a 30-year term. You can also go for a longer term - until 80. The amount or the sum assured, however, depends upon factors like your income, expenses, age and standard of living. Since you are 30, it is obvious that your income, as well as responsibilities, will only increase year on year. It will, therefore, be prudent for you to opt for an increasing term plan. Such a plan will offer you 5-10 per cent increasing cover each year ensuring that you are adequately protected at every life-stage. A term plan will secure your spouse’s financial requirements, while you can simultaneously opt for other saving and investing tools ensuring the all-round protection of your loved ones.

I am planning to upgrade my existing term insurance plan. Someone said that I can do it with a rider.  After going through all the available riders, I am confused about which one to buy. How do I decide a suitable rider?

Life insurance riders offer additional benefits and coverage at a low premium. There are various kinds of riders available providing a host of benefits. Some offer coverage against accidental death and/or disability while some offer risk coverage for critical illnesses. There are riders which waive premiums in case you are unable to pay them due to illness or disability. There are many more that pay hospital cash, surgical cash, and so on. The choice of a suitable rider solely depends on your needs. Therefore it is vital for you to first evaluate your existing covers, risk and financial requirements before opting for an appropriate rider.

I am 45-year-old and have purchased a term and a savings plan. Do I need to buy any more insurance cover so that there is enough corpus to take care of my wife after I die?

Every individual should have adequate insurance, not more not less. To cover yourself with the appropriate amount, you should evaluate your existing savings, insurance covers, loans, liabilities and future financial requirements. First, assess your current coverage and see if the maturity proceeds are enough for your wife to sustain the current lifestyle and fulfil her future requirements. In case you are falling short, you should reach out to your insurance company or a financial advisor and bridge the gap with an additional policy.

My uncle passed away last month due to a sudden stroke. His life insurance policy was due for renewal in October. In this case, will his claim be honoured by the insurer?

Yes, the claim should be honoured by the insurance provider. A life Insurance cover stays active until the policy due date as well as in the grace period. If all the past premiums of your uncle’s policy were paid and it was in the premium paying mode at the time of his demise, the claim will be payable.

I have recently changed my address and have shifted to a new city. All of my insurance policies have my previous address. Do I need to notify the insurer about the change in address? 

It is always beneficial to ensure that all your personal information including the address is updated in your insurer’s records. You should ideally write to your insurance company informing them about the change in address along with the new address proof. Ensure that their records are updated. It will not affect the claims payout but will impact communication between you and your insurer.

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The writer is MD & CEO, Aditya Birla Sun Life Insurance. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in