Under term plan, its ideal to declare change in smoking status

Written by Suresh Agarwal | Updated: Nov 13 2012, 09:50am hrs
I have a moneyback policy that will mature in December. Do I have to pay tax on the maturity amount

Ankur Panda

Premiums paid towards a life insurance policy are exempt from tax under Section 80 C and maturity proceeds are exempt from tax under Section 10 (10D), subject to conditions. In case of life insurance policies issued on or after April 1, 2012, exemption under Section 10 (10D) will be available only if the premium payable in any of the years is not more than 10% of the sum insured.

I had taken a term policy online two years ago where I mentioned myself as a non-smoker. Now, I have started smoking. Do I need to disclose it to my insurance company

Yatender Kumar

Refer to the terms and conditions of your specific policy as it may contain guidelines in this regard. In a regular term plan, the insurer usually factors in all possible risks while calculating the premium, at the time of policy issuance. In such cases, it may not be required to declare that you have started smoking, unless otherwise specified. However, if you have availed a special non-smoker rate, you may have signed a declaration on your non-intention to smoke even in the future. In such cases, you must go back and declare the change in your smoking status. On disclosure, your insurance company may decide to charge you smoker rates during renewal.

If I have to look at accumulating funds for my sons education with some element of insurance cover, what kind of policy should I opt for

Poonam Gupta

Depending on your risk appetite, you could opt for an insurance plan of either traditional or Ulip variety for the purpose. Opt for a plan where you are the insured and your son is the beneficiary. He will get the benefits irrespective of your presence, ensuring that plans for his education are not disturbed.

I would recommend that before the purchase, determine the cost of planned education at the future point and opt for a sum assured that reflects this amount. This can be arrived at by factoring inflation over the time to the event to the cost of similar education on the current date.

There are two types of child plans available. One that pays out the sum assured to the child at the policyholders death or maturity or survival benefits at policy maturity to policyholder.

The second is a more evolved product where both the sum assured and the maturity benefit are paid in case of policyholders demise in a staggered manner. While the sum assured is usually paid out immediately on policyholders death, the fund value or maturity benefit is paid at end of term. Such policies usually come with a premium waiver rider on death or disability and are costlier.

I am told that pure term policies are usually for 60 years. Is there a term policy that will cover me till 80-85 years

K C Choudhary

There are term plans that offer cover even up to 80-85 years, some of which are targeted specifically at senior citizens. But these normally tend to place a ceiling on the maximum sum assured.

The author is executive vice-president, Kotak Mahindra Old Mutual Life Insurance

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