I am 42 and earn Rs 10 lakh a year and my monthly expenses are Rs 40,000. I have two children aged 15 and 12 and my wife is a homemaker. How much insurance should I take and which policy?
Arun Nayyar, Gurgaon
Basically, when you decide on a sum insured, you look at a lump sum amount which should be available to your financial dependents and is enough to generate a regular income to maintain their lifestyle. Therefore, there is no thumb rule for deciding the sum insured. The major factors which influence the determination of sum assured are the present and the future income, expenditure, investible surplus, existing amount of savings and so on. At your age and level of earning, it would be best if you go for a term insurance plan and a pension plan. The term insurance plan will enable you to secure an adequate amount of risk cover at a relatively lower premium outgo. On the other hand, the pension plan will provide you the surplus for the investment. If you invest in a pension plan at this stage, as your vesting age will be about 30 years away, you will have to invest a much smaller amount for a decent pension.