Non-annual premiums are a bit higher than annual payment

Published in Mint on September 22th, 2013, Written by Kapil Mehta

How does a critical illness rider along with a life insurance policy work? Should one go for it?
—Atul Nagar

Critical illness riders are optional extensions to your life insurance policy. They pay a fixed amount if you are diagnosed with any of the pre-specified diseases. I recommend buying critical illness riders provided they fulfil two criteria: a large number of diseases are covered and the disease list includes illnesses that may not be covered by a regular health insurance.
Insurers offer critical illness riders covering four to over 20 diseases. Buy a rider that covers at least 15 diseases. The four disease options are considerably cheaper but not that useful.
The specific diseases covered are the key.
The most important cover is for diseases that are debilitating but may not require hospitalization or daycare procedures. Standard health insurance may not fully cover cost in these situations. Such diseases include blindness, paralysis, stroke, Alzheimer’s, loss of speech, deafness or coma. Ensure these diseases are covered in the critical illness rider you select.
Some health insurers have also introduced stand-alone critical illness plans that you can evaluate.

I have been told that for a life insurance policy, one should opt for annual payment. What is the benefit of doing this?
—Sameer

I prefer annual premium payments for a few reasons. First, it is administratively simpler. You need to remember one renewal date a year rather than each month or quarter. Second, non-annual payments are often registered through ECS (electronic clearance service) mode. You have to be certain that the ECS mandate will get honoured every month. If there is a default the premium payment is cumbersome. Third, non-annual payments are slightly more expensive than annual payments.
From the insurer’s perspective, annual payments are significantly superior because renewal of annual payment policies is 25-50% better than other modes.

I have given wrong birth date in my life insurance policy by mistake. How can I rectify this?
—Rahul

This is a serious issue that you should rectify immediately. Write to the insurer with your correct date of birth and supporting documentation. The documentation that most insurers will accept includes your passport or school leaving certificate. Often documents such as driver’s license, Aadhar card or voter card are also accepted.
The issue is particularly serious if you gave an age that is less than your actual age. In this case, the insurer can cancel your policy or make you pay extra premium. Providing an age more than your actual age is less of a problem because the insurer may have charged you more premium than required.

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