What is a personal accident policy and how do I take one? How different is it from a health insurance policy or a term plan?
? S P Narayan
Personal accident policies provide cover against temporary or permanent total disablement due to an accident, or other incidents in that nature as the policy contract may specify, such as fractures, burns, etc.
They also cover hospitalisation expenses for treatment of injuries caused by accidents. Some policies may cover specific situations like inability to eat, move or dress. A health plan, on the other hand, covers the entire gamut of health-related costs the policyholder may incur, including on accidents. But accidents covered by a generic health plan may not have the expansive features and coverage of a standalone accident policy. Term plans are protection-only life insurance plans.
What are the benefits of a floater plan? What would happen to the no-claim bonus that I have acquired on an individual policy that I hold for seven years and wish to convert into an FF plan?
? Gautam Kapoor
In case of an individual plan, one needs to take out separate policies for each family member. In case of a family floater, all members are covered under one policy. Family floaters are simpler to manage as one can add or reduce members, and the maximum sum assured can be used for the care of one or several members. They may also be marginally cheaper.
Typically, they are renewable only till the oldest member of the group remains within the renewable age, and, earlier continuous coverage and claim history may also not get proportionate benefit. Companies could have different policies regarding conversion of the no-claim bonus, such as premium discount or increase in the cover eligibility.
Are there timing issues while buying a unit-linked insurance policy (Ulip)? As the markets are now moving up, should I still go for a Ulip?
? Samar Raina
I will not advise timing the market. Ulip investments have to be made with a long-term saving horizon and protection objective. That way, you will definitely gain from the power of compounding and rupee cost averaging. Ulips offer a choice of funds in the debt and equity space. You can make the choice based on your risk appetite and investment objectives. The investment returns are enhanced given the broadly evenly spread charges through the policy term and the higher initial allocation. Also, there are no sudden redemption pressures due to the way the product is structured, enabling fund managers to manage investments better. As an asset class, though, equity offers better returns over the long term.
Does it make sense to keep two term plans in the family ? one for me and the other for my wife?
? Pankaj Gupta
It is imperative that all eligible individuals in the family are covered. Any untoward incident concerning one person can put a lot of financial strain on the family, and having all eligible adult members sufficiently covered will go a long way in making up for the loss of income from any one source. You can buy separate covers or opt for a joint term cover. Joint covers normally come with reduced mortality charges as the calculation gets impacted by the lower mortality risk of the younger life. There are several types of joint cover plans available, such as those offering partial or full payout at the first death, payout on the second death only, etc.
I will be relocating abroad where the company, as part of my perks, will also offer me a term cover. Should I surrender my personal policy that I have been servicing for seven years? If so, what will I get if I surrender the policy?
? Akash Kumar Singh
Your company will cover you only for the duration of your employment, as against the term plan you have bought for yourself, which will cover you irrespective of your employment status. Also, if you decide to buy a policy at a later date after your current employment spell, you may have to pay a higher premium, since mortality risk status changes with age; higher the age, greater the risk. So, you are advised to continue your current plan. However, as you are relocating overseas, do check if your plan covers you in that country, since insurance companies factor in country risks and exclude some from the scope of coverage. You may want to compare the cost of your current cover to newer offerings in the market, as the cost of term plans, especially those sold online, have significantly reduced.
Suresh Agarwal
The author is executive vice-president, Kotak Mahindra
Old Mutual Life Insurancen Send your queries at
fepersonalfinance@expressindia.com
