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How judicious is it to go in for a term insurance policy? For a person with a salary of Rs 50,000 p.m and a family of three, how much should be set aside for such a scheme?

— Smitha

Getting a term insurance policy is a very smart decision. It focuses only on covering the risk part of the insured. One can get enough risk cover at a very low premium. It does not include any investment component. Therefore, it is remarkably cheaper in comparison to ULIP, endowment plans or any money back policies. The risk cover can be decided on the basis of family size, number of earning members and monetary requirement of dependents after death of policy holder. The thumb rule to arrive at the term insurance requirement is getting a risk cover of minimum 10 times the annual income. It holds good if we assume that the monetary requirement would remain same for the next 10 years after the death of policy holder. For a family of three and annual income of Rs 6 lakh, the ideal cover size should be Rs 60 lakh, considering no big requirement expected in next 10 years or else risk cover should be increased.

I checked the website of NSE Gold and found it is safe to invest in Gold ETF. Since I'm working abroad, how do I purchase online since in NSE Gold site the local contact details are required.

— George

NSE offers Gold ETF investment with variety of AMCs. To buy Gold ETF, the investor is required to open a DEMAT account with any depository participant (DP) of NSDL, for example ICICIDirect, Motilal Oswal, HDFC Securities, SBICapsec, Angel Broking, etc. In the account opening form, NRI is required to mention type (NRI against Resident) and sub type (Repatriable or Non-Repatriable). KYC documents required by a NRI to open DEMAT account are: A) Proof of Identity: Passport, Voter ID Card, Driving License, PAN Card, etc. B) Proof of Address: Foreign Address Proof is a must. However, local address can also be added simultaneously if required. Example of valid proof are: Bank Passbook/Statement, passport, etc. C)Declaration to comply with FEMA. D) If only foreign address is provided, the DP can take same address in local address field. Online buying is possible through the electronic trading facility provided by the DP. Apart from above mentioned points, tax implication due to profit/loss on investment should also be kept in mind.

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