Term insurance uncomplicated, easiest product of life insurance

My son's Public Provident Fund (PPF) account is getting matured in September 2022, and he will turn 18 in 2024. Can I renew the PPF account or open a new account in his name in 2024?

-V Nikunj, Raichur

Congratulations on completing fifteen years of investing in PPF. Well, you are permitted to extend it for another five years. You can seek an extension in blocks of five years upon maturity after the 15 years lock-in period. The bank or post office will automatically convert the PPF account in your son's name upon attaining majority. They will remove the guardianship from the account when your son, the account holder, turns 18. There is no limit on the number of times you can opt for an extension. You need not contribute or deposit annually, which means you can extend it for five years in 2026 and 2031, and so on. It is not mandatory to deposit money after maturity (15 years). The balance will continue to earn interest until it is closed. Also, you are eligible to make partial withdrawals. You can withdraw 50 per cent of the corpus. The other choice is to close the account, take the tax-free corpus, and invest in the equity market. You may choose either of the options depending on your financial needs.

Is term insurance better if I am going for life cover? What is the minimum sum assured one should take?

- A Anuradha, Hyderabad

Term insurance is the uncomplicated and easiest product of life insurance. As the name suggests, term insurance is a pure cover plan offering protection for a specified period. The nominee receives the predetermined death benefit in the event of the death of the life insured. The most important advantage of term insurance is the high amount of coverage offered at extremely nominal premium rates. Insurance companies have introduced some term insurance plans that provide maturity benefits, which means the return of premiums only if the policyholder outlives the policy term. Term insurance policyholders have the option to increase the amount of coverage offered by a term plan by opting for additional riders.

Arguably, life cover or sum assured should not be less than ten times of annual income. This means the sum assured should be Rs two crore if the insured's yearly earnings are Rs twenty lakh. Sum assured is the life cover amount that the insured's nominee or dependents receive from the insurance company in the event of the policyholder's demise. However, one should be able to pay premiums as the premium amount depends on the sum assured. At least, start with five times of annual income if you can't afford the premiums and enhance the cover over a period of time.

This is only possible when you improve your self-awareness concerning life insurance and various policies and options. Select the right insurance cover and the best insurance plan that suits your requirement, depending on your age, income, dependents, and nature of work. Make thorough research and analyse a few life insurance plans. Try to stay away from traditional insurance plans, especially those that give you money after every few years. These are a few points to be considered while buying a life insurance policy. Be well-informed, and the benefits are galore.

I invested in ICICI Bluechip Fund, HDFC Mid-Cap Opportunities Fund and Axis Mid-Cap Fund. Are these funds good to continue, or do I need to discontinue any of these?

- RV Satyanarayana Raju, Bhimavaram

Two of your funds i.e., Axis Mid-Cap Fund and HDFC Mid-Cap Fund, fall under mid-cap funds. Ideally, mid-cap stocks offer more growth potential than large-cap stocks. The comparatively lower growth mattered less because large-cap stocks enjoyed investors' confidence and loyalty. On the other hand, mid-cap stocks come with moderate risk and less volatility than small-cap stocks. The Axis Mid-Cap Fund and HDFC Mid-Cap Funds' portfolios consist primarily of the auto, real estate, entertainment, retail, chemicals, metals, and financial services sectors. You may exit the HDFC Mutual Fund in order to avoid duplication and build a well-diversified portfolio. ICICI Bluechip Fund, a large-cap fund, holds fifty bluechip stocks. You may consider adding an index fund to your portfolio. You may switch your HDFC Mid-Cap Fund to HDFC Index Sensex Fund.