Ask Mint Money | Some firms do not differentiate between smokers, non-smokers

Published in Mint on, Jun 19 2012, Written by Kapil Mehta

I am 58 years old and have a term insurance of Rs 50 lakh which will expire in another two years. However, my children are too young right now. I want to have a cover for myself even after 60 years of age. What are the available options for me?
– R Naina

Several insurers offer term plans up to 70 years. If you buy another term policy with a Rs 50 lakh cover until age 70 that will cost you about Rs 50,000 per year. Few insurers offer a term until age 75. That will cost you about Rs 62,000 per annum. These prices include service tax. In general, most insurers will require you to purchase for a minimum tenor of 10 years.

I am a 45-year-old smoker and planning to buy a term insurance policy for about Rs 1 crore. I have received premium quotes from several insurers and one insurer is much cheaper than others. Could there be a catch?
– Raj K

There is no catch. Insurers follow different strategies with regard to the smoking risk. Some companies do not differentiate between smokers and non-smokers, others apply considerable premium loading for smoking and a few insurers add smaller amounts.

I am 31 years old, married, and earn Rs 60,000 a month. At present, I invest Rs 25,000 in mutual funds (MF), and Rs 2,000 in a unit-linked insurance plan that’s performing terribly. I have housing and car loans and pay a total equated monthly instalment (EMI) of Rs 20,000. I now realize that my life cover (outside what’s provided by my employer) is inadequate. I’m told the cover should be six times my annual salary—roughly around Rs 60 lakh. I am considering a term plan. I want a cover till maximum age. Please suggest.
– Srikant Nagalapur

I recommend an insurance cover that is 10 times your income adjusted for insurance or assets that you may already have. Your cover ought to be Rs 72 lakh less the cover your employer provides and the current value of your MF. If that amount is Rs 60 lakh, then term insurance will cost you about Rs 850 per month for a 30-year cover, which is the maximum tenor offered by most insurers.

I had invested in Max New York Life’s growth fund in 2009 and have paid for the mandatory four years. Currently, its net asset value is -28.82%. Shall I wait for the fund to perform better since the tenor is 10 years or shall I withdraw the money and invest elsewhere?
– Pawan Chabra

Stay invested in the fund. This particular growth fund has generally performed better than the market, including in the last year. Also, most of the policy charges would already have been deducted from your fund so you will not save much in terms of cost by shifting at this stage.

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