Ask Mint | Giving the gift of life and security

A single-premium policy is the perfect gifting idea for a newborn

The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.

I am a 45-year-old businessman. I have just taken a a Rs75 lakh home loan. I am confident that I will be able to service it. But what if something untoward happens to me? Is there a life insurance plan to insure the home loan? Should I go for it?

Your liability increases the moment you sign on a home loan, which makes it necessary for one to take a life insurance plan. This will help ensure your loved ones a respectable life even if something untoward happens to you. There are two options: You can go for a Pure Term Plan for a sum equivalent to the housing loan. Thus, in the case of any unforeseen event, the insurance cover will come in handy for the family as it would not be burdened with any loan liability. The other option is a Mortgage Reducing Term Assurance Plan that is designed to give borrowers a life cover equivalent to their home loan. With such plans, the objective is to introduce customized risk protection at an affordable price. The payment of equated monthly instalments progressively brings down the outstanding loan over the years and the insurance cover also reduces.

I work in an advertising agency and have been recently blessed with a daughter. My father wants to buy a gift for my daughter. I have suggested a life insurance plan. Does it make sense from a long-term perspective?

You are absolutely correct in suggesting a life insurance policy as a gift from her grandfather. Children’s life insurance is thoughtful, practical and a valuable gift that can help a child take the first step towards financial security.

A single-premium policy is the perfect gifting idea for a newborn. A single-premium policy is a plan where you pay for the insurance policy with only one payment. In other words, it gives the assurance that with a one-time payment, the plan for the child continues and, hence, would help to provide for the critical milestones in her life.

Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Rajesh Relan, managing director, MetLife.