I have invested in money back plans for my daughter's education. Should I also invest in a childrens' plan? Will the childrens plan give me same returns? My daughter is 11 years old and I want money by the time she is 16 or 17 for her college education. – Sharmila Krishnani
Five years is too short a period for buying a child plan or a money-back plan. For such short duration, it is recommended you opt for mutual funds or a single premium insurance endowment plan. If you pick the mutual fund option, I recommend that you support it with a term plan on your life. If your investment horizon was over seven-eight years, I would have recommended a child plan with a waiver of premium option.

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I am 35 years old. I have a term insurance plan of Rs 75 lakh for a period of 25 years. It is 10 times of my annual income. I want to know the criteria for increasing the sum assured. Can I also change the term of my policy and increase it by five years? – Umesh Raje
It depends on the terms and conditions of your existing term plan. There are plans that allow for an automatic increase in sum assured on certain milestones like marriage, birth of child etc. There are some plans that may allow one to increase the policy term, but these could be subject to enhanced medical and financial underwriting. The simplest option is to buy a new term plan.

I started working this year and I want to buy an insurance policy to save tax. Should I buy a term plan or an endowment plan? For how much period should I buy it? Can I increase the amount later when my salary increases? – Rajiv Tandon
Saving tax may be one of the rationales behind buying insurance. It isn't however the only reason to buy it. Ideally, the first policy for any individual should be a term plan and should be purchased for the duration of one's working life. Example, if you are currently 26 years of age and your planned retirement age is 60 years, your policy term should be 34 years. Yes, there are many term plans giving you an option to increase your cover basis your life stage, today.

Rushabh Gandhi

(The writer is Deputy CEO, IndiaFirst Life Insurance)

(Source: DNA Money)