Embedded Value: Your life insurance policy can help you now

By: |
May 29, 2020 1:00 AM

From offering financial protection against any eventuality in the time of Covid to raising a loan to meet your daily expenses, a life insurance plan can literally be a life-saver

The function of life insurance is providing confidence in an uncertain situation, hence it is necessary for people to know how this, one of the oldest financial tools, can serve them better and infuse certainty in their life

As COVID-19 strengthens its grip on our day-to-day life, it forces us to rewrite our aspirations about our basic as well as long-term needs. The emerging scenario obliges us to reset our values about social and economic behaviour. There is an urgent requirement for an early introspection to realign our needs and expectations with the new norms being set by the pandemic.

Function of life insurance
The function of life insurance is providing confidence in an uncertain situation, hence it is necessary for people to know how this, one of the oldest financial tools, can serve them better and infuse certainty in their life, at least in respect of financial security when everything seems to be slipping out of the hands for most people across the globe. Savings for rainy days or for meeting future obligations in any form except insurance are under severe threat of getting wiped out. Companies have their production shut for months together.

Key actions for policyholders
In the face of uncertainties, those who are well-prepared are those who are adequately insured. We are exposed to the risk of contacting the virus any moment when we step out of home or even when someone steps in. We must review our insurance cover and go for enhancing the protection through a suitable insurance plan available online. Enhancing the cover up to non-medical limit should not be a problem while buying a policy from home.

Almost all life insurers offer term insurance plans of a large sum assured. Existing policyholders or even those who are yet to provide their families adequate insurance protection must take advantage of this channel during such a vulnerable time. There are life insurance products which provide fixed healthcare expenses through riders which may be preferred by the new proposers within the non-medical category, as these days visiting hospitals for medical examination is not desirable.

Those policyholders who have unit-linked insurance plans (Ulips) plans must utilise the lockdown period for thoroughly evaluating their fund’s performance and must utilise the switch options if the fund is not growing as per their expectations. Normally, Ulips once purchased remain unvisited by the policyholders and often they lose opportunities for better growth of their funds due to ignorance about stock market movements.

Review insurance policies
Policyholders must utilise the time available today to review their insurance portfolio, their adequacy, terms and conditions, the inbuilt benefits and facilities or an action on their part that has become overdue such as change of address, registration of bank account number or even change of nomination. Some policyholders might have even forgotten to pay premium already due or a money back instalment already due that could not be paid in the absence of bank account number in the records of the insurer.

During the current period when employers are either not paying salary or paying reduced salary, a policyholder may resort to taking loan under his eligible policies to meet expenses. This is a very convenient and reliable source of obtaining funds with minimum formalities and perhaps within a day itself. I think the entire request to payment process could be completed within a day only.

The secret of managing a crisis is making the best use of available tools and resources without any panic. Life insurance policyholders can dig out gold in the paper document kept unseen and untouched in the drawer. Covid-19 has provided an opportunity to several crores of policyholders to evaluate and utilise this powerful product for a comfortable today and a brighter tomorrow.

The writer is former MD & CEO, SUD Life Insurance

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