Life Insurance: Opt for a term plan until your retirement age

Published: November 28, 2018 2:16 AM

A term policy is one of the most cost effective methods to ensure your loved ones are adequately protected at all times,and is a must for any earning individual.

Life Insurance, life insurance policy term, investment options, Life insurance child plansLife insurance child plans and mutual funds are two different financial instruments and cater to differ-ent financial goals.

By,  Pankaj Razdan

I will turn 55 years next month. My friends are advising me to buy a term plan for Rs 50 lakh. What should I do and how much will be the premium?
– Aditya Singhal

A term policy is one of the most cost effective methods to ensure your loved ones are adequately protected at all times,and is a must for any earning individual. The primary objective is to act as an income replacement tool. It eliminates financial burden on a family in case of an untimely death of the earning member. Hence, it is prudent to opt for a term plan until your retirement age. Ideally it is 60, for which you will need to opt for a five-year term. You can also opt for a longer term until 80 years of age. Evaluate your annual income, medical condition, lifestyle and future financial requirements to opt for adequate sum assured. The premium amount will vary from insurer to insurer and from product to product.

Read also: IRDAI proposes new guidelines for life insurance policies; Here’s how they will benefit buyers

I am not sure whether to buy a child plan for my son who is five-year old or invest in mutual funds for his higher education corpus. Please advise.
—Arjun Verma

Life insurance child plans and mutual funds are two different financial instruments and cater to differ-ent financial goals. The one you will opt for should be determined by the outcome that you are looking for and your financial needs. Child plans are life insurance solutions that are designed for this need serving the dual purpose of insurance cum savings. While the child receives a corpus post the policy term is over, what makes such plans special is that in case of any eventuality of the premium paying parent, death benefits are paid to the nominee and the rest of the premium is waived off. There is no lapse in the policy and the child gets maturity amount at the end of the policy term. You should therefore evaluate all savings and investment options and decide on one or a mix of both to adequately fund your child’s dreams.

Should I buy two life insurance term plans in case one is rejected?
—Devraj
Rejection of a claim depends on the cited exclusions in a policy. If a term plan is rejected by one insurer, chances of the same being rejected by another is high. A claim is rejected if any material fact like health condition, occupation, etc., is not declared by the customer at the time of purchase. By splitting your sum assured into two policies you will lose out on the discount offered for high sum assured.

The writer is MD & CEO, Aditya Birla Sun Life Insurance and Dy. CEO, Aditya Birla Capital. Send your queries to fepersonalfinance@expressindia.com

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