I am planning to buy a house. I have heard that a life insurance policy can help in increasing my eligibility. What kind of policy will help in such a case? Will it help if I have a high-value term plan?
Single-premium policies and limited-premium payment policies can act as good collateral for housing loans. However, it is only to the extent of the surrender value offered by a plan. A high-value term plan would cover you against the liability of a home loan. However, please note a term plan may not have a surrender value in most cases. In case you are planning to protect your legal heirs from the home loan repayment obligations in the event of any contingency, you can consider mortgage redemption plans offered by life insurers.
What is a double accident benefit? How does it work? In what circumstances should someone buy it?
Double accident benefit usually refers to a benefit in case of accidental death, whereby the claimant gets an additional amount over and above the sum assured. This additional amount is equivalent to the basic sum assured and, hence, the term double accident benefit. Most of the insurers have this benefit either as an in-built cover or as an add-on cover/ rider, which can be opted by the proposer. This is ideal for people who are young and whose liabilities are likely to increase in future.
What does assignment means in a life policy?
Assignment means the transfer of benefits under a life insurance policy to a person/ entity. Assignment can be done in return for a consideration or can be done without seeking any consideration. It is entirely at the discretion of the policyholder. It automatically cancels any nomination made by the policyholder. Once assignment of life insurance policy is made and the same is brought to the notice of the insurance company, all benefits that may accrue under the policy and proceeds thereunder, shall be automatically payable to only the assignee.
I am 26 and single. I have no dependents. I prefer mutual funds for investments. Do I need to buy a life insurance policy? Will buying a term plan in the early age help me in the future?
I would like to clarify the myth that life insurance is taken only for dependents. It is crucial to ensure financial independence for yourself irrespective of the presence of any dependents. Insurance provides you safety of funds, liquidity and also protects you from any unforeseen eventualities besides death, which can harm you financially, by acting as a forced saving. You can plan your retirement through pension plans and a life insurance policy can also help you in tax planning by lowering your tax liability.
A term plan is beneficial if you have dependents, as the claim is payable only on death and not on maturity. A term plan if bought at an early age would certainly lower the premium than if bought at an advanced age. In case you are looking for flexibility of adjusting your life cover or long-term growth of your investments, you can choose an unit-linked insurance plan which offers complete transparency and market-related returns.
Kamesh Goyal is the country manager of Bajaj Allianz. Send your queries at yourmoney@bsmail.in
