I want to take a term plan and need your guidance on the following:
Brief about me (it might be useful for you to evaluate my financial planning):
I am 26 year old (male) unmarried. Planning to marry within a year or two and to have two children down the line. One child by the age of 30 and another one by the age of 33. :) My father is working in a private company and his age is 58. My mother is a homemaker and her age is 52.
CTC: Rs. 30 lacs per annum
In Hand: around Rs. 2,00,000 per month
Current and future liabilities:
1. Home Loan (for under-construction flat):
Loan Amount: Rs. 20 lacs
Tenure: 15 years (last EMI will be in 2029)
EMI: Rs. 20,000
2. Want to take another home loan for one more home (within a year):
Loan Amount (approx.): Rs. 80 lacs
Tenure: 15 or 20 years
Things I want to cover:
Children education (primary, secondary and higher education)
Monthly expenses of around 50K per month
Queries regarding term plan:
- How much cover shall I take?
- I was advised that the cover should be 10-20 times of your annual income. So it comes to around 3-6 crore.
- Whatever be the cover amount, Shall I take one policy of that whole amount or take multiple policies of small amount.
- I was advised that the sum assured of a policy should not be more than 50-75 lacs as more the amount, more time it will take to process. Insurance companies generally pass small amount policy claims faster than big amount policy claim. So Is this correct?
- If the answer of the second question (above) is correct, then what shall be the maximum amount of each small policy? And shall I take those policies from the same company or different companies? And Are there any precautions I need to take when taking multiple term-insurance policies.
- If the answer of the second question (above) is correct, then shall I take all those multiple small policies at the same time and for same time frames or take difference policies at different times and for different time frames.
- How to decide on the insurance-company?
- IRDA ratings include ratings for non-pure-term policies also?
- I checked the premium amount on PolicyBazaar.com for Rs. 1 crore sum assured and the premium was in the range of Rs. 7K-32K from different companies which is a very large gap. So I am really confused. I don't want to pay high premium for the same sum-assured because of ignorance. But at the same time, I don't want to take a term-plan just because the premium is cheap and later on it will create problems in passing claims.
- I was told that you can go with any company as long as you fill the form correctly and disclose all the medical details correctly. If this is the only thing to consider, then shall I go ahead with the company with cheapest premium. Or Are there any other metrics also to consider?
- Shall I prefer govt. insurance companies over private insurance companies
- Please suggest some good term-plan insurance companies
- I was advised that you should go for online as the premium is lower compare to the same offline-policy. Also in case of online, every condition is there in front of you but in case of offline, agent might cheat or hide some important conditions from you just to sell you a policy
- If I should take more term-policies whenever my salary increases, I will end-up with hell lot of policies and my family will face lot of problems because then they will have to complete formalities for a lot of policies.
- Or, shall I consider a policy which allows me to increase the sum-assured on the same policy by increasing premium. If yes, then I guess I will be left with very few insurance companies as very few companies provide that option.
- Even if the claim is rejected by the insurance company, it has to pay the same amount from its pocket. Out of that amount, 80% goes to the IRDA and 20% goes to a NGO. The only benefit insurance company have in rejecting a policy is that it doesn't have to pay the re-insuance fees which is very minimal (e.g. 3K for 1crore policy). Re-insurance amount is the amount that insurance company pays to have insurance for large amount policies.
The whole idea is to take well-informed decision while taking the most important insurance as I don't want my family to suffer in future just because I made mistakes while taking the term-plan.