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Published in Mint on, May 22 2012, Written by Kapil Mehta
I am a 29-year-old married male. I have a term plan of Rs 50 lakh. We recently had a baby girl. Now I plan to increase the sum assured to Rs 1 crore. Should I now go for a unit-linked insurance plan (Ulip) or an endowment plan?
—Nityanand Sahay

Your sum assured should be at least 10 times your annual income. If you earn up to Rs 10 lakh a year, then your term cover is adequate. The incremental Rs 50 lakh of term insurance that you buy should cost less than Rs 8,000 for a 30-year term.
The second insurance that you must have is health insurance for the entire family.
The third insurance for you to buy should be a 10-year growth-oriented Ulip. Do not invest more than 25% of your savings into a Ulip.
I would not recommend a traditional endowment plan since it typically has high hidden costs and provide limited exposure to equities. At your age, equity would be one of the best long-term investments to consider.
I am 32 years old and have a one-year-old child. I have three Ulips for which I pay an aggregate sum assured of Rs 40 lakh and aggregate premium of Rs 35,000. I plan to buy a term plan as well. How much should be the cover amount for me? Should I stop any of the Ulips I already have?
—Vinod Kondiyal

Your term cover should be about 10 times your annual income, less Rs 40 lakh of insurance that you already have. At your age a 30-year term plan for a cover of Rs 50 lakh will cost about Rs 8,000 per annum.
It is hard to comment on the Ulips you have without some more details. However, as a general rule, if you purchased these after September 2010, then keep them active because these are Ulips with a cap on charges. If these were bought before that then you will need to compare the continuation costs with surrender charges to take a decision.
I am 35 years old. I want to take a Rs 2 crore term cover and nominate six people to that. Will I be allowed to do so? Also, my annual income is Rs 15 lakh. Will I get such a huge cover? Can I name my nephew and niece as nominees?
—A. Dhar

Yes. You will get a Rs 2 crore life insurance cover because insurance companies routinely allow a sum assured up to 15 times the annual income.
You can have six nominees and may also specify the proportion of benefit that you would like each nominee to receive. If there is insufficient space in your proposal form, then use a separate sheet to list out the nominees.
You can name your nephew and niece as nominees, provided you give a credible reason to the insurer. Some credible reasons could be that they are financially dependent upon you or that you do not have children of your own and treat them like your own.