I haven’t paid a term plan’s premiums for two consecutive years. Can I revive it?
—Nidesh Kumar
A lapsed policy can be revived within two years from the date of the first unpaid premium, by paying all due premiums and charges. After two years, this is not allowed.
What are the new surrender charges on various life covers?
—Santosh Kumar
Surrender charges vary based on whether a plan is linked or non-linked, and depending on the premium payment term. This information is available in the policy brochure. As the policy progresses, surrender charges become negligible to nil. However, it is not advisable to surrender a policy in the middle of the term.
If I frequently port my health cover between private and public sector insurers, can it create problems?
—Nischal Sood
Through portability, you can transfer most credits, such as waiting period for pre-existing conditions, bonuses accrued and waiver of the no-cover period. However, if you opt to club the bonuses acquired under a previous policy with sum assured and treat this higher amount as the revised sum assured, it will increase the premium.
Also, if the new insurer prescribes that one has to purchase in multiples of R50,000, and your new sum assured with bonuses works out to, say, R1,25,000, the sum assured will automatically increase to R1.5 lakh as the insurer cannot provide a cover for R1.25 lakh. But the portability benefit will only be available up to R1.25 lakh. You will have to pay additional premium for the R25,000 extra. Premiums can also get affected if your medical condition has changed after you purchased your previous plan.
In an LIC policy, does one get bonus every year? Is the money deposited in my bank account?
—Pallav Gupta
Participating policies declare bonuses annually. Such bonus is added to the insurance policy account and is payable at maturity. Depending on the type of plan, a terminal bonus may be added during maturity, based on the surplus. Traditional policies tend to provide a reasonable cover along with sum assured and bonuses.
What are moneyback plans? Is it the bonus that is given back?
—Gaurav Singh
Moneyback plans are schemes that give back a part of the sum assured to the policyholder at predefined intervals. Participating plans declare bonuses, but they do not form part of the pre-maturity moneyback. Bonuses are accrued to the policyholder’s account and are usually given out along with the maturity benefit at the end of the term.
I burnt my fingers seven years ago buying a Ulip. The markets are rising again. Should I look at other Ulips?
—Vikas Seth
Unit-linked plans, in their current form, are extremely transparent and customer-friendly. Also, equity as an asset class has delivered better returns over the long term.
Though returns from Ulips are linked to market performance, since the investment is made regularly over a long period, the corpus can be expected to be significant.
There are several Ulips offering a high protection-to-savings ratio and you should find one that suits your needs. But do bear in mind that insurance products are designed to deliver over the longer term, so your investment horizon must be long to unlock the maximum value out of the product. A minimum investment horizon of 10 years term is recommended.
By Suresh Agarwal
The author is executive VP, Kotak Mahindra Old Mutual Life Insurance
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