Insurance Uncovered

I am a 27-year-old female professional. I was earlier working for an MNC, but have now started private practice. I will be getting married shortly. Could you please guide me regarding the ideal life insurance policies? Is it better to go for postal life insurance or buy it from banks or LIC? I would like to have money back policies. I do not want to pay heavy premiums too.

S C DSilva

It is good to see youngsters showing interest in life insurance. Since you are under 30, a plain-vanilla term insurance policy will be cheap. For a sum assured (SA) of ₹1 crore, you will pay a premium of only ₹10,000-12,000 per annum.

However, you need to first be clear about the objective for which you are buying life insurance.

If the idea is to protect your dependants and leave behind some income for them, then a term insurance policy is the best. But choose the SA wisely. Select the cover amount based on your current income and liabilities such as a home loan or personal loans that are outstanding.

But if you are looking to make some returns, insurance is not a good investment tool. Money-back policies or other endowment plans, which are insurance plus investment combo products, generate poor returns with IRR of just 4-5 per cent a year.

It is wiser to put the money in balanced mutual funds or other less riskier avenues such as debt funds or post-office saving schemes.

Now, coming to the question of ‘where to buy’, your choice has to be between LIC and private life insurance companies. In postal life insurance (PLI), private sector employees are not covered. Also, you can only buy an endowment policy in PLI; there is no option for a pure term cover.

You can buy insurance from a bank, but that restricts the options. Any bank will sell policies of only its insurance arm. But with age on your side, you can compare premiums and go for the best product in town.

So, when you decide on the SI, visit the website of aggregators such as www.policybazaar.com and mull over the premium rates. Also, you need to give attention to the claim settlement track record of companies. LIC has the best claim settlement record of 98.3 per cent. But private insurers, including Max Life, HDFC Life and Aegon Life, too have a claim settlement ratio of 97 per cent and above and are a good choice. What you need to note is that LIC’s term life policy is far expensive than that of private insurers. There is a sovereign guarantee on all LIC’s policies; this is what differentiates it from the products of private insurers. Otherwise, any policy from the leading private life insurers mentioned above is good.

 

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