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Published in Mint, Written by Kapil Mehta
I will be taking an online term insurance in this month. Being a central government employee (36 years old), my family and I are eligible for pension after 20 years of service. Presently, I am in my 12th year of service. Should I take the term up to the maximum possible age or for just about another 10 years to ensure my family gets pension?
—Debangshu Ball
Term insurance and pension plans address two entirely opposite needs. Term plans cover the risk of you dying early whereas pension covers the risk of living long. Term insurance will pay your nominee the sum assured if you die while your insurance is active. This amount will help your family members maintain their standard of living and future expenses. Pension plans pay a certain amount of money to you for as long as you live. If you live very long and run through your savings, the pension plan continues to provide a regular income.
Most people, including government employees, have a working tenor of at least 30 years, even though pension eligibility kicks in after 20 years. The term insurance should cover you for your entire working life, which is why I recommend it until age 62 in your case. Consider increasing the sum assured in the future as your income increases.
I am 29 years old and earn Rs. 10 lakh a year. How much insurance will I get?
—Komal Nag
Insurers will provide you up to 25 times your annual income as sum assured. This is Rs.2.5 crore in your case and will cost you about Rs.23,000 per year. In case you want to spend less, buy at least 10 times your annual income, or Rs.1 crore, for a premium of around Rs.11,000 per year.
Can I change the due date of my premium for my policy?
—Shakti Bhakat
You cannot change the due date, but you can choose not to pay on the due date. This is not an option I recommend unless you are clear that you want the insurance cover to lapse or want to surrender it.
We have several contractual workers at our resort. Can we buy life cover for them?
—Bela M.
You can cover contractual workers in a group term life or a group personal accident cover. Make sure the contractual nature is declared to the insurer and job profiles of the workers are accurately described. Group personal accident will cover only accidental death, while group term life will cover death by any cause (except suicide) in the first year.
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