I am 30 years old and want to buy a term insurance plan. Should I get it online or from any insurance broker, and for how long?
—Name withheld on request
The product construct of term insurance will remain the same, whether you buy it online or through an insurance broker. In fact, most platforms that sell online are insurance brokers and vice-versa. So, the differentiation in terms of product and process is limited. The principal differences are of options, service and price.
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First, you should consult an entity that provides multiple options neutrally without a bias towards one insurer. This would enable you to make an efficient comparison. Second, term insurance requires coordination with insurer at the time of policy purchase to enable proper underwriting. If the policyholder has an adverse medical history, the back and forth with the insurer is generally high. Do ensure that your point of contact is the same throughout the process and is well versed with the underwriting requirements. Third, if the pricing difference is more than 5 to 7%, you may consider the channel that offers a lower premium. You may also want to consider who your nominee would be more comfortable to deal with at the time of claim.
Term insurance should be bought to cover your active income years i.e., until retirement. For salaried professionals, the retirement age may vary between 58 to 65 years. It is advisable to buy a cover 10 times your annual income.
I am 37-year-old and earn ₹1.5 lakh per month. I have three dependents— wife (35), son (4) and daughter (2). I have a term insurance of ₹50 lakh from ICICI Pru till the age of 62. Is this sufficient or should I increase the cover or tenure of the policy?
—Name withheld on request
The coverage till 62 years is fine. Most people retire by then, so there is no active income to replace. Further by that life stage, an individual would have dispensed off their major financial liabilities and obligations such as mortgage, higher education of children etc. By 62, it is likely you would have built enough retirement corpus to generate a passive income. So, an additional coverage is not required.
However, the amount of your current coverage is low. A rule of thumb is to have a cover 10 times your annual income. Therefore, you should have a cover of at least ₹1.8 crore. Consider increasing your term insurance sum assured.
Abhishek Bondia is principal officer and managing director at SecureNow.in.