I am planning to buy a term plan. I can pay a maximum premium of R10,000 in a year. Which plan should I opt for?

– Sachin Gadekar

I appreciate your decision to buy a pure term plan. In pure risk products, the key differentiator is price. Shortlist offerings from different insurers on this basis. Several insurance companies offer term plans online that tend to be 10-20% cheaper than their offline counterparts. The premium varies depending upon age, health conditions and lifestyle (for example, premium for smokers could be higher), etc, since the degree of risk would be different in each case. Assuming that you are a 25-year-old non-smoker opting for Kotak e-Preferred term plan for a 30-year term. You could get a cover of about R1 crore for R10,000 annual premium.

I am 35 years old and want to invest R5,000 every month in a pension plan. At current rates, how much pension can I expect to get every year once I retire at the age of 60 and which are the plans I should consider?

– Sumit Kamal

The way a pension plan works is that you invest during the accumulation phase, in your case 25 years, to create the corpus. The maturity amount or corpus will depend on the type of pension plan purchased (for example, Ulip/traditional, with or without cover). At the end of this period you have to necessarily buy annuity from at least two-thirds of the proceeds. The annuity amount will depend on the type of annuity plan and the annuity rate offered by that plan at that point in time. You will certainly benefit from the power of compounding over a long period of time.

How do I get a critical illness rider attached to my life insurance policy?

– Subodh Verma

Check out the rider options available with your plan. Normally one can opt for a rider at the time of policy inception or at any policy anniversary during the policy term, subject to applicable eligibility criteria. There is an additional rider premium one would have to pay.

What are the charges an insurance company will levy on a policy? Will they disclose all the details?

– MS Rao

All charges are disclosed in case of Ulips. The major charges include premium allocation charge, policy administration charge, fund management charge, mortality charge and guarantee charge in case of guarantee. These charges are mentioned in the product brochure.

The benefit illustration should give you a year-wise break-up of these charges, which for illustration purposes is calculated at 6% and 10% assumed rate of return. According to the Insurance Regulatory and Development Authority, the maximum charges that can be levied on Ulips in 3% for a period of up to 10 years and 2.25% for a period above 10 years.

The author is executive vice-president, Kotak Mahindra Old Mutual Life Insurance

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