Ulips are cost-effective if you have a 7-10 year outlook

Published in Mint on, Apr 02 2013, Written by Kapil Mehta

I am 30 years old and want to buying a Rs.3 crore term cover. I found out that premiums of various companies vary considerably—from Rs.24,000 to close to Rs.1 lakh per year. Can you suggest a term cover with low premiums and where settlement is not a problem? What documentation is needed and where should I buy the policy from?
—Antony

The plans that cost Rs.40,000 and lower are online term plans and the others are offline plans that are to be purchased through an agent or broker. If you do not feel the need for advice, are in good health and comfortable purchasing online, then go for the online options.
There is little value in buying plans that cost above Rs.50,000. With any insurer, the probability of your claim being denied is low since you will be fully underwritten with a medical examination. Settlement processes are fairly standardized across companies.
You will need an age, income and address proof. Your passport or driver’s license could be an age and address proof. Income-tax returns could be your income proof. Typically, insurers provide a sum assured up to 20 times your income.

I am 25 years old and have been working for the last two years. I earn Rs.45, 000 a month. I want to buy a life cover for myself. Some people have advised me to buy a unit-linked insurance plan (Ulip)? Please advise.
—Prabhat

A pure life or term cover should be your first insurance priority as it will provide considerable financial security to your current or future dependants. Generally, you should have a life cover of at least 10 times your annual income—about Rs.55 lakh in your case. This will cost you less than Rs.10,000 per year.
Also, buy a health insurance for yourself—Rs.5,000 will get you a health cover of Rs.5 lakh.
After you have made these two important insurance purchases, you can consider long-term investment opportunities in equity. This investment could be done through mutual funds, exchange-traded funds or Ulips. Ulips are cost-effective only if you have a 7-10 year outlook.

In how many days can one expect to get the claim after one’s death? What guidelines do companies have to follow with regards to claim processing?
—Swathy

The insurance regulator specifies that the insurer must raise any claim requirement within 15 days of your lodging a claim. Once you submit all the documents, they must take a decision within 30 days if there is no investigation required. In case the insurer decides to investigate the claim, then a decision must be taken within six months.
The regulator is concerned about the time taken for claim settlement and takes a strict view if there is a delay.

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