Insurance queries: Keep lifecycle needs in mind

While taking an insurance product,what should I look at and is it better to purchase a term policy instead of an endowment policy?

While taking an insurance product,what should I look at and is it better to purchase a term policy instead of an endowment policy?

-G K Srinivasan

Insurance is purchased to secure yourself and family against unforeseen eventualities such as death,permanent disability,financial emergency or loss of income and planned events with high financial implication such as childs education,marriage etc. Choice of a product should be based on an individuals lifecycle needs,financial capacity and risk appetite. A pure term plan does not have a savings component hence you can buy higher cover at relatively lower rates. Ulips focus more around generating higher investment returns and are opted by more aware investors who are willing to take calculated risks. Traditional plans on the other hand are feature-based products that normally have a larger insurance component than Ulips. They provide higher death benefits,even growth of investments over the policy term and are generally opted for by investors with low risk appetite.

How do I take an insurance policy for my home durables and what kind of schemes are available in the market?

-Arvind Kumar

A general insurance company should be able to help you with your need. There are several competing products with different features for you to choose from. Compare these and zero in on the one that best suits your requirements.

How does a fixed maturity plan work and can the fund house give us any assured return or yield?

– M K Madhavan

I think you are referring to mutual funds. But,if you are referring to guaranteed plans by insurance companies then they aim to give you what they had promised in the first place assured returns,capital guarantee etc. An insurer seeks to fulfill this commitment through judicious management of funds.

I took an Ulip two years ago and now I want to surrender it. Do I have to pay a surrender fee and how much money will I loose?

-Rahul Agarwal

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Ulips issued two years back would have a lock in period of three years,which means if you surrender before the lock-in period is over,you may have to pay a premature surrender penalty. However,one would need to look at the exact terms and conditions of your specific plan to calculate the exact surrender penalty payable in your case. Typically,surrender penalty reduces drastically and in some cases may also waived after completion of lock in period.

* The writer is executive vice-president,Kotak Mahindra Old Mutual Life Insurance

* Send your queries at fepersonalfinance@expressindia.com