Make sure to disclose health status in the proposal form

Published in Mint on, Jan 08 2013, Written by Kapil Mehta

I have been told that insurers deny claims on flimsy grounds. How can I be sure that my claim will get paid?
—Sachdeva

The claims that get denied are typically for gross non-disclosure. For instance, if a person on frequent dialysis or who has suffered a cardiac arrest does not mention these ailments in the proposal form. The other issue is a death claim after non-payment of premiums.
So you must make sure that you fully disclose your health status in the proposal form. If possible, select a plan wherein you undergo a medical test. This reduces the scope for the insurer to claim non-disclosure at a later date. Make timely payments of your premium. Do not depend upon the insurer to send you a renewal notice. Finally, purchase the policy through an intermediary you trust. They will follow through and complete the documentation if a claim is ever made.

We are a large exporter employing 400 people. How can insurance help us in our gratuity payments? Can pension also be covered?
—Khanna

Group gratuity is offered by several insurers. The insurer does an actuarial valuation of your gratuity liability and sets up a trust to manage that fund. You will need to pay a one-time premium to set up the fund for past gratuity liabilities followed by a regular annual premium for increases in liability. This premium is treated as a business expense which is a material tax benefit.
Gratuity claims are paid to employees directly from the fund. These are tax-free for the employee upto certain high limits.
The role of the insurer is to assess your liability, invest the premium judiciously, handle the claims payment and provide you regular management information system.
The group superannuation product that offers employees a pension when they retire operates in a similar manner to the group gratuity.
Both are good products because of the tax benefits, ease of administration and the relatively good returns that insurers credit to the account.

I purchased an unit-link insurance plan (Ulip) in 2007. I paid a premium of Rs.10 lakh but my current fund value is just Rs.9.7 lakh. I think this is a bad investment. Please suggest how should I get out of this?
—Manisha

The Ulip you purchased has high charges. I generally find it best to surrender these policies as soon as the surrender charges are minimal and invest in alternate investment products. You could invest in mutual funds or new Ulips that have been introduced after October 2010.

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