Got a question about your money? What you should or should not do with it?

Our expert Devang Shah has the answers. Got a question? Please write to us.

My monthly salary is Rs 18,000 and my husband's, Rs 27,000. We pay Rs 25,000 as EMI on a home loan of Rs 30 lakh (Rs 3 million).

We invest Rs 50,000 per annum in an LIC [Get Quote] policy.

Our child is just 18 months.

How do you suggest we proceed with our investments? Should we continue with the LIC policy?

- Anu Sinha

Hi Anu,

This is the first time that a person with a child is asking me if they should continue their life cover. It has always been the other way round. They have a child and come to ask what life insurance they should buy.

Let me rephrase your question. I believe you are asking me if you should continue paying about Rs 4,000 every month as premium for your life cover? Am I right?

Well, at this point in time, the income of your family supports the three of you and a monthly liability of Rs 25,000.

If one of you were to pass away tomorrow, the income would drop but the personal expenses would not halve. In addition, the expenses towards your child's upbringing as well as the Equated Monthly Installment will not change at all.

In layman's terms, this gap is the economic loss suffered by your family because of the death of one person. Life insurance is supposed to protect your family from such a catastrophe.

While it is difficult to evaluate your current cover or recommend an alternative cover without a detailed and proper understanding, you must consider a term cover actively. You will find that a term cover gives you much more cover for the same amount of premium as compared to other insurance policies like money back and endowment.

A term cover is a basic life insurance policy and the cheapest available. If you die during the term of the policy, your beneficiary gets the money. If you live, you get nothing.

If you are really looking at security, there are a few steps you must look into immediately.

1. Protect your family against loss of income due to death, disability and illness. 

2. Protect yourselves against sudden large expenses such as critical illness, disability/ rehabilitation, accident, etc.

You may want to put affordable policies in place to cover those areas.

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