Term covers pay death benefit even if you are outside India

Published in Mint, September 10, 2013, Written by Kapil Mehta
I am 35 years old and run my own company. I am out of the country for at least five months in a year. What kind of cover is advisable for me? Also, if any mishap occurs, will the cover support me when I am outside India?
—Suraj
There are three risks that you need to insure. First, premature death, irrespective of whether that happens in India or overseas. Second, medical expenses if you are hospitalized in India and third, medical expenses if you require treatment while you are overseas. These three risks can be insured by term insurance, mediclaim and overseas travel insurance.
The term covers available in India pay a death benefit, irrespective of where you are. A standard mediclaim policy will cover costs only when you are in India. Overseas travel insurance will pay your medical costs when you are overseas.
You can buy overseas medical insurance each time you travel overseas. Some insurers even offer a single policy for multiple overseas visits.
I am 28 years old, married and have a 5-month-old kid. I earn Rs.21 lakh per annum. I would like to take a term insurance policy for Rs.1 crore till the age of 65. Though I already have an endowment policy for Rs.23 lakh for which I pay a yearly premium of Rs.84,000, I feel I am under-insured. I have seen online policies too and am a bit confused. Please advise.
—Raju V.P.
You should have a sum assured that is 10 times your annual income, which in your case should be about Rs.2 crore. Since your endowment cover is Rs.23 lakh, you need an additional death benefit of roughly Rs.1.75 crore. This will cost you about Rs.20,000 per year and, given your income, looks affordable.
If you are comfortable researching and procuring online insurance, then go ahead and buy the term plan online. However, if you need advice on sum assured, premium payment options, riders and insurers, then speak to intermediaries representing different insurers and buy through them. You generally pay 20-30% more premium for an offline purchase so make sure you get quality advice if you select offline insurance.
Too often, people are paralyzed by options and unable to take a decision. I have seen tragic cases where someone took a term insurance proposal form, did not fill it up for weeks and then died unexpectedly in an accident. My view is that the decision to procure term insurance is the most important one. Getting the lowest cost term insurance is important but a secondary decision. So buy your term insurance fast—you cannot go wrong with that decision. In the future, if term insurance rates fall or better options come about you can switch without a surrender penalty.