Q1. I am a 40-year-old homemaker. I was detected with hypertension, but it is now under control with medications. Is it too late for me to buy term Insurance?
A homemaker may not bring in the money, yet she is the bedrock of the family’s financial infrastructure. It may not be apparent, but her contribution directly boosts the productivity of the household, and by extension, that of the entire nation.
Going by what you have mentioned, you will be eligible to get insurance based on underwriting.
READ MORE: This is why homemakers need an independent term insurance plan
What is underwriting?
In underwriting, an institution takes on a financial risk for a fee. The underwriter will study the application for life insurance and, based on the person’s risk profile, determine if the requested policy should be issued with or without some changes.
Financial underwriting helps the underwriter to ensure the policy amount is in line with your needs and those of your family. Medical underwriting helps the underwriter determine the risk by evaluating your health parameters.
Principle of indemnity
As a homemaker, you will be eligible for a risk cover of only ₹50 lakhs based on the principle of indemnity. The insurer must indemnify any financial loss the family might incur if the insured member dies.
As you have hypertension, the insurer would want to know details about your disease and its treatment.
It is important to disclose everything. This will avoid any issues at the time of claim on account of some undisclosed information.
The underwriter may issue the policy at an increased premium factoring in the underwriting fee. They may also reject or postpone the issue.
It is always a good time to buy an insurance policy. Term insurance is a good option because it's a low-cost way to protect your family.
READ MORE: Why health insurance is a necessity for young mothers
Q2. I want to invest ₹5 lakhs in the share market for 10 years. Which are the best shares to buy?
Direct investing in equity shares requires resources to continuously monitor the performance of the shares and the skillset to track the companies that interest you. It involves going through the annual statements of the companies, conducting a thorough analysis to understand the company's capabilities, comparing it with its peers, and keeping a sharp lookout on the whole sector.
Regardless of the investment horizon (10 years in your case), you must always monitor the companies you have invested in and make changes when needed. When you invest in the stocks of a few companies you have studied, you are exposed to a high concentration risk. Also, any structural change in one or two of those companies can have a negative impact on the whole portfolio.
READ MORE: Have ₹5 lakh corpus to invest? This is all you can do at the beginning of the year
Is there a better place to start when you are new to investing? Consider diversified mutual funds. Mutual funds are overseen by professional fund managers with experience in the stock market. Therefore, compared to direct equity, you need to invest less in research while choosing mutual funds.
When choosing mutual funds, take a close look at the asset management company (AMC) in charge—their reputation, rolling returns, risk ratios, fund management approach, etc.
To minimise fund manager bias, let your portfolio include some index funds that replicate indices such as Nifty 100, Sensex, Nifty Midcap or Small Cap.
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