Insurance Query

I am 40, my wife is 38. Our daughter is five. Why is it important to invest in a term insurance policy compared to other policies? I have invested in fixed deposit, LIC policy, mutual funds, land and gold. For how many years and for what amount should I invest in term insurance? Which insurance company offers 100 per cent claim settlement? Please advise regarding a suitable policy and whether I should take it for ₹50 lakh or ₹1 crore.


Every individual who is a breadwinner for the family ought to buy a life insurance policy to ensure the financial security of the family when he/she is not around. A term plan is a pure risk cover. During the policy term, on death of the individual covered, his/her nominee gets the sum assured (benefit amount). If the policyholder survives, there is no return of the premium or any return over and above the premium (basically no investment component to it). And, unlike bundled products — endowment or money back plans — these term policies do not have a hefty premium. Even for a large sum insured (say, ₹50 lakh to ₹1 crore), premium is nominal. For you (age 40), the premium for a ₹1-crore policy will be ₹18,000-20,000 a year.

Today, there are term policies that provide risk cover for 40-50 years till a maximum age of 75-80 years. But given that the very objective is to cover an individual’s life during his working years, it is enough if you look for a policy that provides cover till you retire — say, 60-62 years.

With regard to sum assured, it is dependent on your current income. The thumb rule is that the life insurance policy amount should be 10 times the individual’s annual income and if you have a loan in your name, say, housing loan or a personal loan, add that too to the life cover.

Most leading private insurers and LIC have a claim settlement record of over 90-95 per cent now. The top five are LIC (98.3 per cent), Max Life (96.95 per cent), Tata AIA Life (96.8 per cent), ICICI Prudential (96.2 per cent) and Aegon Life (95.31 per cent). Since a term plan is a plain-vanilla cover, buying online can save some premium. Among the best here are Max Life Online Term Plan Plus, ICICI Prudential iProtect Smart and Aegon Life’s iTerm.

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