Insurers will tell you that everybody needs insurance and that almost every Indian is under-insured. But the real answer lies in your age and the number of dependants. However, medical insurance is highly recommended.

What policy should I take out if I am single?

If you have parents who are dependant on you, you must look at a policy that covers your life for a substantial amount. The general rule of the thumb: 10 times your annual income. If you are between 30 and 40 years of age and earning around Rs 5 lakh per annum, insure yourself for around Rs 50 lakh. And go for a plain vanilla policy (aka pure life policy). If you do not have dependants, then taking out an endowment policy that promises reasonable return isn't a bad idea.

What policy should I take out when I get married?

Marriage generally means you need complete insurance cover. It also means you are likely to look at investment options that promise higher-than-average returns. However, taking out an endowment policy is not something we would recommend. A better way of looking at insurance is to see it simply as a cover for your life. Typically, you have to pay an annual premium between Rs 800 and Rs 900 on a policy of Rs 1 lakh for a term that could range from 25 years (for a 25-year-old) to 15 years (for a 45-year-old). Therefore, if you are 25 years old and think your spouse should get Rs 30 lakh in the event of your death, you need to commit Rs 7,140 a year towards insurance premium for a 25-year term plan (Birla Sun Life Term Plan). If you survive the term, you get nothing in return. That may seem like a waste of money, but remember this: premia on endowment policies could be as much as 300 per cent those on normal ones and returns on the same are insignificant. Take out a life-only policy, and invest the money that would have otherwise gone into endowment premia in other vehicles. Done wisely, this could earn you much much more.

What policy should I buy for my kids?

Your (dependant) children don't require life insurance. On the contrary, you need to insure your life adequately. However, a policy that takes care of your children's educational needs may help. A simple way of assessing your insurance needs when you are a parent is to calculate your expenditure over the term of the policy. Add up your annual expenditure, include the funds required for the children's education and account for inflation.

Who should buy unit-linked insurance?

Unit-linked insurance is for people who need returns on their insurance premium. If you don't have the time or inclination to invest your money, this may be your best bet.

Should I update my insurance needs?

Most certainly. You should update your insurance needs every time your income, liabilities, and responsibilities change.

How do I calculate returns on my insurance policy?

Most insurance policies do not offer a guaranteed return. So there is little sense in breaking your brains over returns on insurance policies.

How can I know what my insurance agent does not tell me?

Agents earn the least commission on a pure life insurance policy. That should tell you something.

I was taken in by my agent's spiel and took out a money-back policy. Does it make sense to surrender the policy?

Most of us are under-insured. So it doesn't make sense to surrender your policy. But do take out a life insurance policy that covers your life for a hefty amount. And get a surrender value from your insurance company.

-Swati Prasad