Most term insurance policies have zero surrender value

Published in Mint on 11 August, 2015, Written by Abhishek Bondia

Can I change the premium payment frequency of a life insurance policy? If so, how do I go about doing it?
—Hari Krishanan

Yes, you can change the premium payment frequency of a life insurance policy. For instance, move from monthly premium mode to annual premium mode. Such changes are generally entertained by insurers on policy anniversary date.
You can visit the insurer’s branch office and submit a written application for the same. If all your previous premiums are paid, the insurer will affect this change. There may be a slight additional premium if you want to pay in monthly or half yearly mode.

I have not paid premium for some time now . I want to discontinue my policy. Will I get anything back from the insurer?

If you want to discontinue your policy, you can surrender it. Depending on the type of policy and number of years of paid-up premium, life insurance policies acquire a surrender value.
Most term life insurance policies have zero surrender value. Only the term insurance that has a return of premium option has a surrender value. Unit-linked insurance plans (Ulips) issued after October 2010 and surrendered after five years, do not have any surrender charges. The insured will get the full accumulated value of the underlying units. Traditional endowment policies have a more opaque system on surrender charges. Endowment policies only specify the aggregate surrender value depending on number of years of continuity.

I applied for term life insurance and paid the premium upfront. After the medical check-up, the insurer has now asked for additional premium. Is it legal? What is the validity of initial premium, if they can change more later?
—Gagan Mitra

The standard premium table published by insurers refers to a standard proposal with average risk quality. Online calculators of insurers also use these standard rates.
When a proposal is underwritten by insurers, they evaluate the case against their benchmark. If the risk is higher, they can either choose to reject the proposal completely or accept the proposal
but with higher rates. If they make a counter-offer to the prospective insured with a higher premium, it is the insured’s discretion whether to accept it or not. If the insured declines the counter-offer, she will get the full premium refunded.
After the proposal form is filled and medical check-up conducted, the insurer does a medical underwriting of the proposer. In your case, it seems they would have identified some health risks because of which they have proposed a loading.
Typical cases where an insurer issues a policy with a higher loading include low height to weight ratio, high blood pressure, and high cholesterol.

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