Insurance

Who needs insurance?

The earning member of the family who has dependants or liability (loans like home or business or hospital)

Why do you need insurance?

With the aim to fulfil the financial requirements of the family in one’s absence after death

Which are the types of insurance products in the market?

  • Term Insurance
  • Endowment policies
  • ULIP
  • Money back policies
  • Child care plans

Q. What type of insurance policy should one prefer?

A. PURE TERM INSURANCE

Q. What do you mean by pure term insurance?

A. Term insurance without any riders or moneyback

Q. What should be the sum assured to be preferred?

A. 15-20 times the income at present

Q. What should be the tenure of the insurance to be preferred?

A. 65-70 years
or
till one becomes financially independant (no financial liabilities)

Q. Which of the insurance options should one prefer ?- return of premium at end of term – increasing sum assured by 5-10% every year – lumpsum payout vs 50% payout on death and then the rest over 10 years… – additional payment on accidental death/ critical illness rider/ waiver of further premiums on diagnosis of critical illness – limited term payment like 5 years or 10 years

A. The options are to confuse people.
KISS: “Keep it Simple Silly”
BUY PURE TERM INSURANCE WITHOUT ANY RIDERS

Q. Which is the best option for term insurance?LIC OrPrivate companies like ICICI, HDFC, etc?

A. Both are Equal LIC (High premium but trusted brand) = Private ( Low premium but New companies ).

Q. What criteria should be considered before finalising the company for buying term insurance?

  • 1. Claim settlement Ratio (IRDA website)
  • 2. Average amount of claim settled (IRDA website)
  • 3. Premium amount
  • 4. MWP Act

With online term insurance plan the claim settlement ratio is slightly declined than you purchase offline although directly through company office..is it True?

A. False.

Q. When a bank sanctions any home loan, is it compulsory to buy insurance from that bank?

A. No. It is not compulsory.
If they insist, can tell them will choose another bank for loan or complain to IRDA

Q. What do you mean by waiver of premium for permanent disability?

A.     The permanent disability will be certified ONLY by the medical practitioner of the insurance company
Only waiver of future premium should be preferred if there is permanent disability.

Q. What is terminal illness benefit?

A. A life assured shall be regarded as terminally ill only if that life assured is diagnosed as suffering from a condition which, in the opinion of two independent medical practitioners’ specializing in treatment of such illness, is highly likely to lead to death within 6 months.
B. In this case, the payment of Death Benefit will be accelerated and the policy will terminate.

Q. What if critical illness benefit?

A. In case Life Assured is diagnosed with any of the Critical Illnesses covered under the plan, all future premiums payable under the plan will be waived (Not given by all insurance companies)
Critical illness rider should NOT be taken with life insurance ideally, because, the premium.is almost similar to critical care plan from health insurer, and we in case the need arises the payout of critical care rider is deducted from from total term plan. Term plan cover remains reduced by that much amount thereafter
When we are critically ill, we need urgent hospitalization and urgent money, which will come from a critical care health insurance. Life insurers pay critical care after diagnosis and after we survive the illness for 30days.

Q. For a LIC policy, there is some clause wherein we can stop paying future premiums and claim the due amount at maturity year. What is it?

A. It’s called converting the policy to a paid up policy

Drawbacks:
  • – Returns on paid up policy continue to be poor.
  • – Around 6 to under 7 percent may be..
  • – So,converting to paid up is a poor option.

Q. Who should fill the application form for the term insurance?

A. Yourself

Q. Should you choose to not disclose anything in the insurance form like smoking, drinking, adventure sports etc.?

A. Disclose everything. Do not hide anything

Q. Should you disclose about any other insurance you have availed from other companies in the application form?

A. Yes

Q. Should one prefer medical test by the insurance company?

A. Yes

What is free look in period on purchasing a new policy?

A. If you are not satisfied with the terms and conditions of the Policy, please return the Policy Document to the company for cancellation with reasons within

  • A. 15 days from the date you received it, if your Policy is not purchased through Distance Marketing
  • B. 30 days from the date you received it, if your Policy is an electronic policy or is purchased through Distance Marketing On cancellation of the Policy during the freelook period,
  • C. Return the premium is paid subject to the following deductions:

i. Proportionate risk premium for the period of cover

ii. Stamp duty under the Policy

iii. Expenses borne by the Company on medical examination, if any The Policy shall terminate on payment of this amount and all rights, benefits and interests under this Policy will stand extinguished.

Q. What is eInsurance?

A. The insurance policy is held in a DEMAT form instead of a physical form

Q. Which company saves the demat eInsurance account?

NSDL/ CDSL

Q. Is it compulsory to have eInsurance policy?

Not at the moment

Q. What are the advantages of eInsurance policy?

A. 1. Having an original physical copy is not required at the time of processing the claim
(Physical copies can get damaged or lost)

2. This demat account can be accessed anytime and anywhere

3. The demat account depository (CDSL/NSDL) give reminders for payment of premium

Q. How to get eInsurance policy?

Just select eInsurance while buying the term insurance.

Q. What is to be done after eInsurance account is active?

1. Appoint the nominee as the legal appointee to have access to your eInsurance account

2. Share the username and password with your nominee to have access to your
eInsurance account.

Q. What is MWP Act?

Under this act, Section 6 highlights it’s importance: ” A  policy of insurance effected by any
married man on his own life and expressed on the face of it to be for the benefit of his wife, or of
his wife and children, or any of them, shall ensure and be deemed to be a trust for the benefit of his
wife, or of his wife and children, or any of them according to the interests so expressed, and shall
not, so long as any object of the trust remains, be subject to the control of the husband, or to his
creditors, or form part of his estate “

Q. Why is MWP Act important before buying an insurance?

A. For a married, male policyholder, availing a term insurance plan under the Married Women's
Property Act 1874 (MWP Act) helps in protecting your family's financial interests in your absence.

Once a policy is availed under the MWP Act, it may not be attached by courts for repayment of
your debts by any creditors. Only your wife and children will be entitled to the Sum Assured in the
event of your demise.

The term policy under the purview of MWP Act will be considered as a trust . Only trustees will
have control on the policy including servicing, receipt of benefit amount. In case of a death claim,
the policy proceeds are received by the trust and can only be claimed by trustees. It cannot be
claimed by creditors, relatives or form a part of the will (estate of the proposer)*. The trust shall be
holding the claim proceeds for the benefit of the wife and/or child(ren). Hence, the financial future
of your wife and children is protected.

For instance, if you are a salaried person with a home/ personal loan or the owner of a business
and have accumulated debts, your creditors will have the first claim on your policy proceeds in the
event of your death. When you buy a term insurance online under MWP Act, your wife and/or
children will be the only ones who will have access to the claim amount – enabling you to secure
their future financially.

This is also a great solution for a joint family setup, wherein there could be several complications in
the ownership of property, a lot of the fineprint not being explicitly specified thereby increasing the
scope of family disputes over money and property.

Q. How to buy term insurance under MWP Act ?

A. Just ask your insurer,"I would like to buy this policy under Married Women's Property Act (1874)"

Q. Who should one choose the beneficiary and trustee in the MWP Act?

A. You can only choose your wife/child/children as beneficiaries. You can add multiple beneficiaries.

Q. Can the beneficiary and the trustee be the same person while choosing in the MWP Act?

A. Yes

Q. Who can be beneficiary in MWP act for term insurance?

A. For men: Wife and/or children

For women: Kids alone can be beneficiary HUSBAND will not get benefit

Q. I bought online term insurance few years back, in last couple of years unfortunately I started getting some medical ailments. Should I intimate the insurance company about illness which I had got 4 to 5 years after buying the term insurance and if yes, what is the procedure for the same.

A. Not needed to inform

Q. What are the discontinuation charges if ULIP is surrendered before 5 years?

A. After applying for the surrender of a policy *BEFORE FIVE YEARS* , the insurer will first deduct
certain discontinuance charges(DC) and then move the balance of fund value to the Discontinued
Policy (DP) fund.

Discontinuance Charges (DC)
If the annual premium of a policy is > Rs 25,000,
the maximum DC can be Rs 6,000: 1st year
Rs 5,000: 2nd year
Rs 4,000: 3rd year
Rs 2,000: 4th year
No charge: 5th year
For a lesser amount, it is Rs 3,000: 1st year
Rs 2,000: 2nd year
Rs 1,500: 3rd year
Rs 1,000: 4th year
No charge: 5th year

Q. How are ULIPS taxed if surrendered before the lock in period is over?

A. If the policy is surrendered before the lock-in-period of 5 years, then the entire surrender value added in Gross Total Income

Tax: as per applicable tax slab rate of the individual

Q. How are ULIPS taxed if surrendered after the lock in period is over?

A. Exempt from taxation and assured can avail the tax benefit.

Additionally, the tax benefit claimed on premiums paid in earlier years under section 80C have to be reversed if

1.single premium policy has not been held for at least two years

2.In case of traditional policies like endowment & money back haven’t paid at least 2 years premium

3.atleast 5 years premium in case of ULIPs (unit linked insurance plan) is not paid

but hope there shouldn’t be any issue at time of claim if needed.

Q. Can an insurance company deny any claim after the death of the insured if found any discrepancy in the application form and cause of death (Non disclosure of any illness or habit)?

A. After an amendment in Section 45 of the Insurance Act, 1938, an insurance company has only three years to call a policy in question.

B. After the expiry of 3 years, an insurance company cannot deny any claim on any ground whatsoever.

C. Before 3 years: Yes, can deny if they find any justification of fraud due to nondisclosure of information

Q. In case of term insurance with nomination in favour of minors with guardian, does the guardian get the sum assured to use for the minors or he is just the caretaker till the minor turns 18 years?

A. If the nominee’s age is less than 18 years, the policyholder should provide an appointee.

B. A minor is not eligible to receive the amount and it should be paid to the appointee as declared by the policyholder.

Q. What is to be submitted to process the claim after the death of the insured?

A. For processing a claim under this Policy,
the following documents (as may be relevant) are to be submitted:

  • a) Claimants Statement
  • b) Original Policy Document (Not required in eInsurance)
  • c) Death Certificate of the Life Assured issued by the local municipal authority
  • d)Any other documents or information as maybe required by the Company for processing of the claim depending on the cause of the death
  • e) Cancelled Cheque for processing electronic payment Claim payments are made only in Indian currency in accordance with the prevailing Exchange control regulations and other relevant laws and regulations in India.
  • In case the Claimant is unable to provide any or all of the above documents, in exceptional circumstances such as a natural calamity, the Company may at its own discretion conduct an investigation and may subsequently settle the claim.

Q. Who can you contact in case of grievance in processing the insurance claim?

  • A. Customer care of insurance company
  • B. Grievance officer of insurance company
  • C. Senior grievance officer of insurance company

  • D. Grievance committee of the insurance company
  • E. Insurance Ombudsman

Q. Should we surrender the existing moneyback or endowment policies or not?

A. Enter the figures in the excel sheet and take a decision

Q. Should we surrender the existing moneyback or endowment policies or not?

A. Enter the figures in the excel sheet and take a decision