What should be the ideal duration of a life insurance policy?
The duration of a life insurance policy should be determined on the need and the purpose for which the policy is taken. For example, if a child endowment policy is taken to cover the expenses of a child's education, it should ideally coincide with the age at which the child is expected to go for higher studies. In case the policy is taken to build a retirement corpus, it should coincide with the retirement age of the insured. Where a policy is taken to cover the risk of death and to provide income to the dependants, the duration of the policy should normally extend up to the working lifetime of the assured and, sometimes, even the whole of life.
On what basis do insurers grant life insurance? Can they also refuse it? Is there anything one needs to check before approaching an insurer?
Life insurance is a contract between a person(s) (that is, the proposer) and the insurer in which the proposer applies for insurance, submitting certain information — the present and past history of illnesses, occupation, lifestyle and so on. The insurer then assesses the risk on the basis of the information. Based on this, it may accept or refuse the policy or modify the terms on which it is ready to accept the risk.
The insurer, on the basis of its risk assessment, may decline a proposal if the life is not insurable. It can also decline if the proposer is of unsound mind or is an insolvent. In the case of minors, the application is to be made by a parent or a grandparent. Further, the amount of insurance cover has a bearing on the income or the prospective income of the insured. Before approaching for insurance, one should figure out his insurance needs and the amount of premium that can be paid regularly.
I, 25, have started working recently. Should I buy a life cover now or wait for some time?
A life insurance cover should be bought at the earliest. This provides the benefit of coverage from an unfortunate event to the family and the dependents. One will also get the benefit of lower premiums, owing to the lower mortality risk at an early age when the health is good.
The writer is the managing director and CEO of Future Generali Life Insurance. The views expressed are his own. Send your queries to yourmoney@bsmail.in