I am 32 years old and I bought a term insurance plan two years ago with a sum assured of ₹8 lakh. Since then, I have made more investments in mutual funds and the net asset value (NAV) of my units is more than ₹12 lakh. I feel the premium I spend on insurance can be utilised towards systematic investment plans (SIPs). Please advise if I should continue or discontinue with the term plan. Given my investments, do I really need to buy life insurance? I have no dependents.
—Bhushan Kumar
Your current term insurance is inadequate. You should have a term cover of at least ten times of your annual income. So, you should enhance your term insurance coverage.
Term insurance of ₹1 Crore till age of 60 will cost you about ₹10,000 annually. Given your current investments, this amount is unlikely to have a material impact on your corpus. I suspect your current plan is an endowment plan. You should double-check if that is the case. Premium for an endowment plan with a sum assured of ₹8 lakh is significant.
You may not have dependents now. However, with time this may change. It is advisable to buy a term insurance plan when you are young and healthy. It helps to lock-in a low premium for the entire coverage period.
My daughter was supposed to get married next month and we booked the venue for the wedding a month ago and all other arrangements have been made. We purchased a wedding insurance as well but now my daughter has decided to call off the wedding because of certain personal reasons. Can we claim insurance?
—Name withheld on request
Insurance for cancellation of wedding gets triggered if there is an accident at the wedding venue or one of the specified persons are unable to physically attend the event for named causes. Specified persons include the bride, groom and relatives. Names of such specified individuals should be mentioned in the policy. Causes covered include death, injury, and hospitalization of these individuals. If wedding is cancelled due to one of the above reasons, then it will be covered under insurance. In your case, insurance will not pay costs because the wedding has been voluntarily called off.
I want to buy home insurance for my bungalow. If I buy a 15 years long-term policy, will the rates be locked-in for the period, regardless of increase in premium for renewals?
—Arun Khurana
Yes. When you buy a long-term policy, the premium for the entire term is collected upfront. The coverage is then assured for the full term. You will not be asked for additional premium later, even if there is increase in premium.
Always opt for an escalation clause with a long-term policy. Over time, the cost of reinstatement increases. An increasing sum assured helps to cover this inflation.
Abhishek Bondia is principal officer and MD, SecureNow.in. Queries and views at mintmoney@livemint.com