Published in Mint on 7th Oct 2014, Written by Abhishek Bondia
I am a 32-year-old married male, and have a daughter. I earn Rs.15 lakh a year. I plan on buying a term cover. I am a regular smoker and drink occasionally. How much death cover do you think I should buy? Also, will I be charged a higher premium since I smoke and drink?
—Jayesh Patil
The thumb rule on term insurance is to buy cover worth 10 times of annual income. The objective is to ensure enough funds for the family to stabilize before they find an alternate source of income; 10 years is considered reasonable.
Rates for smokers are significantly higher than non-smoker rates. The underwriting is stricter and requires additional tests. As you grow older, the gap between a smoker and non-smoker rate increases further. I will recommend you to buy a cover soon.
Drinking within reasonable limits does not result in higher premiums.
I will be shifting abroad next year. I have some life covers. Can I shift these to a foreign insurance company?
—Ganesh Mathur
Life insurance coverage is a worldwide coverage. In case of death, the Indian insurer will settle the claim irrespective of your location. So, you don’t need to shift to a foreign insurance company.
Inter-country transfer of life insurance is not possible.
I recently got married and have changed my surname to my husband’s name. Do I need to inform my life insurance company about the change?
—Barnali Deb
Yes, you need to inform the insurance company about any significant change in your personal details, such as name, occupation, and so on. At the time of claim, doing so makes the settlement process easier.
If you don’t initiate this change, simple things such as the name on the bank account not matching the one on the policy will cause delays.
I am covered under my employer’s Group Term Life (GTL). Should I still take an individual life insurance?
—Malini
The coverage in an employer-provided life insurance is similar to an individual life insurance policy.
The downside is that when you leave the company, the cover lapses. Since individual life cover becomes more expensive with age, my recommendation is that you buy an individual cover early on.
The other factor to consider is the sum assured. Most companies offer a term cover as a multiple of salary, typically between one to five times. Whereas an ideal sum assured is 10 times of annual income.
At the very minimum, you should buy the deficit sum assured on an individual basis. In case of death, both policies will pay the full sum assured to the nominee.
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