Is it mandatory to buy a life insurance policy with a home loan?

– Kamlesh Rao

Q. I am planning to purchase a ULIP plan. How much does one need to pay as charges? Also, does it help in creating long-term wealth?

Ans: Broadly there are four categories of charges in a ULIP plan – premium allocation charge, policy administration charge, mortality charge and fund management charge. These charges vary from product to product and depend on the policyholder’s age. A Unit Linked Plan is amongst one of the popular investment choices for long-term wealth creation. In addition to the investment, it also offers life insurance cover along with tax-free returns.

Q. I would like to change the nominee in my insurance policy. How can I go about it?

Ans: You can change the nominee of your insurance policy by sending an email request to your insurer or online on the company’s website. You can also visit the nearest branch of your insurance provider and raise the request. The process will be initiated once you submit a written request for changing the nomination along with the reasons, the name and relationship with the new nominee, and the same will be done.

Q. I am taking a housing loan and have been recommended to buy a life insurance policy. Is it mandatory? Can I show my current policies instead to the banker?

Ans: One’s own house or property provides immense security to one’s loved ones. However, one must take note of the fact that life is uncertain, and one can never predict what the future beholds. An unfortunate event can put your family’s financial future and lifestyle at stake. The home loan EMI can take a heavy toll. One should therefore understand that the stakes are high, and one should not risk it. It is always advisable to opt for a life insurance plan and link it to the loan, as it will cover your home loan liability while ensuring that the burden does not fall on your family in case of an untoward event. However, it is not mandatory to purchase a policy at the time of taking a housing loan. You can either purchase a new policy or can assign an existing life insurance policy to the bank.

Q. I am planning to purchase a term plan. If I opt for a Rs 60 lakh cover now, can I increase the sum assured to a crore after a couple of years?

Ans: Life Insurance policy is a contract, and once finalized can’t be changed. Therefore, you would not be able to change the sum assured value of your policy, once finalized at the time of purchase. If you feel that you would need higher cover after a couple of years, you can opt for a higher sum assured right now, at the time of purchase. Being younger, you will get the policy at a much lower premium, which can be locked-in for the entire policy term. Alternatively, you can also opt for the increasing sum assured option, wherein the amount increases by 5% – 10% of the basic sum assured every year. This will ensure that you are adequately insured at every life stage. So, before purchasing the term plan, evaluate your current age, financial responsibilities, health condition, savings and future life goals and then opt for the appropriate sum assured.

(The spokesperson is the MD and CEO, Aditya Birla Sun Life Insurance)