What is the difference between a term plan and a loan protection plan. I have taken a home loan for R20 lakh for which I have taken a loan protection plan. Should I go for a term plan as well?

Deepak Gupta

Yes, you should, for the purpose served by the two is different. A group insurance loan protection plan secures the lender?s interest in case of any specified unforeseen eventuality that befalls the borrower to the extent of principal outstanding. Depending on the contract, the event could either be death only or also include disability, critical illness and loss of income.

A term plan, on the other hand, is meant to secure the policyholder?s family?s life-cycle needs in case of any unforeseen eventuality specified in the plan, such as death or critical illness. An ideal term cover should be between 10 and 15 times of the current annual income.

What are the charges on a lapsed unit-linked insurance policy and till how long will the deductions take place?

Swaraj Kumar

If the policy lapses within the lock-in period of five years, then the fund value, less surrender charge applicable for that year of policy, is moved to a discontinued fund, in which an annual fund management charge is applicable.

At the end of the lock-in period, the remaining fund value is paid out to the customer. If the policy has lapsed after the lock-in period, then the fund value is immediately paid out to customer and no surrender charges apply.

Will I get any guaranteed return in a pension plan and how will the annuity rate be decided?

Arup Roy

As per current norms, the customer is guaranteed of a non-zero rate of return on premiums paid. Some plans could also guarantee an absolute amount upfront, as long as this results in a non-zero return. Annuity rates are decided on the basis of purchase price (in case of single premium), age of entry and option chosen. Rates are subject to change at regular intervals on the basis of the prevailing economic scenario; however, once a policy is issued to a client at a particular rate, that rate will be guaranteed throughout.

I want to take a new life policy, but the new form looks very detailed and cumbersome. Since I don?t want to disclose certain details, will my case be rejected?

Arvind Rao

Insurance contracts are based on the principle of ?Uberrima fides? or utmost good faith. The pricing of a policy and the assessment of risk thereof is based on the disclosures made. In case of incomplete or incorrect disclosures, the insurer reserves the right to reject your claim. It is, therefore, in the policyholder?s best interest to disclose all information sought.

Is the bonus amount accrued in life insurance policy taxable after maturity?

Sumit Shah

As long as the base plan is tax-compliant as per Section 10 (10D), the bonuses paid out on maturity are also not taxable.

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

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