I am a self-employed 28 years old woman with an income that is not constant. How can I determine the appropriate life insurance coverage amount that takes into account my variable earnings and ensures my financial protection?
Life insurance is an ideal tool for income replacement if an earning person is not around. The amount of insurance coverage should be adequate for the dependents to generate an income that can replace the earlier financial support. One of the popular ways to define an adequate amount of insurance coverage is to get a cover of at least ten times the annual income. In the event of an eventuality, this amount will be paid to the nominee, who can invest the money and generate a regular income. There are term plans available in the market, where one can be allowed to choose a monthly income that can be made available to the nominee regularly for a defined period, should there be an eventuality. Such an option can make it easy to choose an insurance cover to secure the future of loved ones.
I am concerned about the rising cost of healthcare and the potential financial burden it may impose on my family in case of a critical illness. Are there any life insurance policies that provide coverage for medical expenses or critical illnesses? How do they work?
Medical insurance is often seen as hospitalisation coverage, however, there would be some non-reimbursable expenses. Also, there could be incidental expenses that may arise after an illness. Critical illness covers offered by life insurance companies come in handy to meet the incidental expenses and during recoupment since these policies or riders offer fixed benefits, i.e. a defined amount, irrespective of the actual cost of treatment/spending. There are several riders available that provide cover against critical illness and disability. If you have an existing life insurance policy, you may add these riders subject to the terms and conditions of your policy. These riders provide a lump sum benefit equal to the Rider Sum Assured on the diagnosis of critical illness or disability. This lump sum payment helps mitigate the health-related expenses incurred during these tremulous times. You may also explore insurance plans that provide a fixed cover, specifically against cancer. These are standalone products that do not require you to have an existing life insurance policy. They work on similar lines as explained above, but certain benefits may differ, subject to the terms and conditions of the policy.
My parents between the age of 50 and 55 years do not have life insurance coverage. Is it possible to get life insurance for them at their age? What are the options available, and how can I ensure their financial security in their golden years?
Recommended is to do a detailed need and suitability analysis before buying an insurance policy. Today, life insurance plans are available till the age of 60 or 65 and beyond (subject to underwriting & terms and conditions of the policy). Usually, individuals aged 50 years and above would have discharged their responsibilities towards their kid's education but could be worried about a reliable income solution for their golden years. Depending on your risk appetite, you may choose a fully or partially guaranteed insurance plan that promises life-long income with insurance coverage. One may also invest in a Whole Life ULIP plan that provides the same solution but with a market-linked return. But considering the age progression, it is advisable to opt for a Non-Participating (Fully Guaranteed) or Participating (Guarantee + Bonus) plan that provides reliable returns.
Vaibhav Kumar is Head - Products Management, Max Life Insurance.