Criteria for selecting insurance cover | Value Research Your insurance cover should be big enough to take care of your liabilities and have enough capital to generate substitute income...
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Criteria for selecting insurance cover

Your insurance cover should be big enough to take care of your liabilities and have enough capital to generate substitute income...

I am 38-years old, and about to purchase a term insurance for Rs 1.5 Crore for 25 years. Firstly, do the amount and tenure make sense? Also, I have been told that I should go for offline insurance as it will offer agent service in case of claim settlement. Is that really required? Or are online policies good enough and hassle-free at the time of settlement?
- Nimesh Parikh

Life insurance aims at extending financial support to the family members if something unfortunate happens to the bread-winner of the family. Term insurance is the best kind of life insurance one can have. You need insurance protection till the time your family depends on your income. The tenure of insurance should last until someone else or income from your accumulated assets can substitute for your income.

Your insurance cover should ideally take care of all your liabilities and yet have enough capital to generate substitute income. While calculating the insurance cover you should also factor in the rising income need because of inflation. It can be suitably adjusted for your accumulated savings and assets.

The estimates should be done following the principles of conservatism, which means be liberal in assuming expenses and inflation; and be conservative in assessing accumulated assets and income from capital.

With regard to your second query, claim settlement for online policies should not be a problem if you truthfully disclose all personal details as required by the insurer. Online policies require you to undergo multiple medical tests depending on your age and personal history. These tests are evaluated as diligently as those of offline plans.

However, you could consider breaking your insurance into two policies from different insurers. This will be an advantage to your nominee if there are any delays in processing claims by one company. Another important point to note is, it is mandatory to disclose existing policy or policies to a new insurer, for smoother claim settlement.



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