Mumbai blasts have once again brought to the fore the need for life insurance cover. Until now, insurance companies have received only 100 claims while over 200 people died in the July 11 bomb blasts.

 

As compensation, the Western Railway doled out Rs 10 crore in helping 533 victims of the bomb blasts. The Life Insurance Corporation (LIC) settled 90 insurance claims to the tune of Rs 3 crore, with average insurance cover estimated at Rs 3 lakh. "Generally, people take time to lodge claims and do it after they get over the shock," says TS Vijayan, CMD, LIC.

 

Other life insurers such as ICICI Prudential got six claims, for Birla Sunlife it was three, Bajaj Allianz Life Insurance and Oriental Insurance got one each. 
 

Estimates suggest that only 20% people are insured in the country and that includes group insurance covers also. Experts feel that group insurance or individual insurance claims ranging between Rs 1 lakh to Rs 2 lakh are not adequate for a family to lead a normal life. Such covers are often referred to as 'funeral insurance'.

 Our expert Vijay Sinha, Assistant Director of Tata AIG Life Insurance, answers few queries.

 

Q. What is the ideal figure that I should be insured for? I earn Rs 1.25 lakh per annum and my current insurance cover is Rs 1 lakh.

Harinder Pal Singh, 44, businessman, Delhi

 

You should be insured for Rs 12-15 lakh (10 to 12 times your income). The need to buy insurance policies depends on the personal situation of an individual, his family responsibilities and other financial obligations.

 

You are above forty and assuming that you will be active for another 20 years, your present insurance cover of Rs 1 lakh will support the family only for one year.

           

Q. What type of insurance policy is most suitable for me? I have taken a housing loan of Rs 7 lakh and can afford to pay a single premium of Rs 40,000.
Vidyadhar Kulkarni, 42

 

Firstly, cover your loan repayments. If you are keen on a single premium policy, home loan protection plan is one good option. A single premium plan of Rs 30,000 to Rs 35,000 will take care of your debts. However, that is not enough. You should also consider getting some life insurance policy.

 

Q. What is the kind of insurance portfolio that gives you maximum coverage and good investment options?

 

Like financial planning, life insurance planning should be reviewed annually based on your budget, availability of products and risk taking capacity. The earlier you start the better.

 

The changing need for life insurance increases with age and decreases once your children have settled in their lives. The right age to take insurance cover is early twenties, as premium is not high when you don't have dependents.

Suppose you need an insurance cover of Rs 40 lakh now note that it would have been only Rs 10 lakh, had you taken the cover at the age of 22 years.

 Q. Can housewives insure themselves? 

Dilip Chakradar

If you are a housewife you can get insurance cover but only if your husband is insured. However, wife's coverage should not exceed that of the husband.

 

Q. What would be the life insurance premium for a 21 year old and a 31 year old respectively?
Vivek

 

A 21 year old will pay a premium of Rs 2,250 to Rs 2,500 for an insurance cover of Rs 10 lakh while the premium is Rs 3,500 to Rs 3,750 for a 31year old.

 

Q. Should I increase my policy coverage? I have taken a triple cover endowment plan that includes accident cover and the sum assured is Rs 50,000. My salary is Rs 3,200 a month.
Dev, 27

 

Ideally, you need life cover ranging between Rs 5.5 lakh and Rs 5.75 lakh whereas under the present triple endowment plan you get death cover of only Rs 1.5 lakh.

 

Had you taken term insurance instead of triple endowment plan, your coverage would have been around Rs 5 to Rs 7 lakh by paying the same premium. It would, however, be a risky option to opt for unit-linked products. You should go for a pure risk cover plan with a low premium and invest the remaining money in a plan that gives steady income.

 

Q. Should I increase my insurance coverage from the present Rs 10 lakh?

Mahesh Manjawala, 53, employee, Ahemdabad

 

Only if your monthly liabilities exceed Rs 10,000, should you go for a bigger insurance cover. Otherwise, its time to think about a retirement plan.

 

Q. When should you plan for retirement? What is the age limit for a person to insure himself under the retirement policy?

 

The right time to have risk coverage policy is also the right time to consider retirement policy. If you do it in your fifties, it leaves you with little time to save enough for rainy days. After fifty, the term cover becomes expensive.

 

But if you have liabilities, the risk cover is important no matter how expensive it may be. Unlike insurance needs which first go up and then down, retirement needs keep increasing with time.

 

Your income goes up with age and so your expenses. It can never decline suddenly after retirement. Medical expenses become high, though you save on commuting and socialising expenses.

  

Q. Why aren't insurance companies giving critical illness policy?

Sanjay Shukla, Lucknow

 

Even if they give you after 65 years of age, the cover becomes unaffordable leaving a little gap between cover and premium.

Source:  Aapka Paisa