Insurers generally do not issue term insurance after age 65

Published in Mint on, Oct 09 2012, Written by Kapil Mehta

I am 66 years old and have a unit-linked insurance plan (Ulip) for which I have paid three regular premiums totalling Rs.1.6 lakh. I don’t want to pay further. How much surrender value will I receive? I want to invest this amount in mutual funds (MFs) or term insurance. Please advise.
—A.K. Sinha

You have purchased the Ulip before October 2010 and those Ulips had high surrender charges. The surrender charges after three premiums vary across products, but are generally above 10% of the fund value. I would not advise you to incur that cost. Instead pay two more premiums after which there should be no surrender charge and you can withdraw your funds then. You will find surrender charge details in your policy contract.
Term insurance is not an option for you because insurers generally do not issue term insurance after the age of 65. Invest in MFs but make sure you select debt-oriented funds and avoid equity exposure as that has higher returns volatility.

I am 29 years old and want to buy an online term plan of Rs.50 lakh. I want to have my mother as the nominee now and change that to my wife later. Is it possible? Should I buy another equity-linked life insurance?
—Jinendra

You can change your nominee at any time. Inform your insurer when you want to make the change. Your term plan should cost less than Rs.5,000 per annum. Since you are young, consider investing in an equity-oriented Ulip but only for the long term. Make sure you assess the fund’s performance, which is available on the insurer’s website. Alternatively, purchase equity-oriented MFs; you could procure these online, too.

I had a kidney transplant four years ago but am in good health now. Can I buy term insurance?
—KY

Most life insurers will decline term insurance to you. Some companies may consider but will carry out a very detailed medical check-up and are likely to impose a high premium.
However, you can buy accidental death insurance from a general insurance company. This will be issued to you, is cheaper than term plans but pays your nominee only if you die in an accident.

I am in the process of taking a home loan. The bank is insisting that I take a term cover along with the loan. Can they do that?
—Anirban

The bank can insist on protection so that the loan is repaid if you were to die prematurely. Typically, the product that the bank sells you is a declining term insurance that reduces as you pay off the loan principal. I believe it is an insurance that you must purchase because it ensures that your family retains the house if you were to die before repaying the loan.
If you feel very strongly about not purchasing the cover, then go to another loan provider.

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