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Life Insurance: Deepak Sood

Source : BUSINESS_STANDARD
Last Updated: Tue, Jun 05, 2012 19:41 hrs
​life insurance

I have heard a parent can take insurance which will pay for his child's higher studies. Could you please elaborate on what kind of products are these? Also, how much returns do they give?
Such plans are popularly known as children plans and are of two types. One is taken on the life of the parent (generally an earning member). The second type is on the life of the child. If the policy is on the child's life, premium waiver benefit rider should be included in all cases. A term rider on the earning parent's life can also be added. Life insurers offer children plans as both traditional and unit-linked insurance plans (Ulip), which can provide benefits at pre-determined intervals for the child's higher studies. Returns depend on the product features, supplementary benefits offered, future investment scenario, investment performance of the fund(s) chosen and so on. What is important under these plans is they provide desired funds (returns) at desired intervals for your child, whether the earning parent is alive or not.

The Insurance Regulatory and Development Authority has shown its displeasure towards highest-NAV (net-asset value) products. I had bought one of these a few years before. If they ban these products, is there a chance my investment will be wasted? Should I switch to another plan or hold on to it?
The insurance regulator has probably expressed its concern over such products because of their complexity. As an existing policyholder you are not likely to be affected adversely by any decision made by the Irda as such decisions are effective prospectively. That is, for policies sold in the future. It is, therefore, advisable to stay invested in the policy.

I am 25 and have just started working. I earn Rs 20,000 a month. I want to buy insurance. Should I first go for a life or a health cover? And, typically, how much cover should I buy?
The amount of cover you buy would depend on your existing income, expected future salary growth, number of dependents you have or may have in the future. I would recommend you look at a life cover of around 20 times of your current annual income. You should also complement this with adequate health insurance cover provided by life and/or general insurance companies. Since you're young, your age and health will help you get the lowest premium possible.

I have a traditional plan from a private life insurer whose sum assured is only five times the premium I pay. The Budget said the sum assured has to be 10 times. Does that mean the product I purchased will not be eligible for tax benefits any more?
There is still no clarity on this aspect, as the Budget is not yet cleared. In case the rule is applicable to existing policies as well, (which is very unlikely and should not be the case), then it is true that your policy will not be eligible for tax benefit anymore.


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