Published in Mint on Aug 30 2016, Written by Abhishek Bondia
What is a life annuity cover? Is it a good option for a life insurance plan?
In a life annuity plan, annuity payments continue till the death of the person covered, irrespective of age. There are several forms of annuities available. In a popular model, you receive an annuity while you are alive and then the principal is paid to your nominee when you die. If you select the annuity option where no money is paid back, then the returns are higher while you live. The good thing about annuities is that they are issued without medical tests and the process of buying it is straightforward. They protect you against the danger of living too long. The negative aspects are that the returns are modest after you adjust for income tax. Go for an annuity as one of your retirement options and not the only one.
I’m 31 years old and have a history of hypothyroid. I still take medicines for it. Will this make my term insurance premium more expensive than someone who doesn’t have this problem?
It is very likely that your insurance premium will be increased or loaded to account for the hypothyroid. So, your insurance will be more expensive than for others. The extent of loading varies by insurer and their comfort level with your medical history. If you can prove that the issue is controlled, and unlikely to cause health issues in the future, the insurer will be more likely to put smaller loadings.
What is the right age for buying a term life insurance?
More than age, a person’s life stage matters in determining the need for life insurance. The right life stage for buying term life insurance is when a person starts earning. If someone starts earning early, she may not have dependents. But she will get the advantage of locking-in low premiums with insurers. As the individual’s life stage advances, i.e., gets married, plans a family, takes a mortgage, she should enhance the sum assured. This is best done by buying a new term plan with additional sum assured.
I had taken a term insurance policy 5 years back but have not paid any premium for the last 2 years due to financial crunch. Can I revive it now if I start paying the premiums again?
Yes, you can revive the policy by paying all the unpaid premiums along with interest. The insurer may levy an additional charge for revival. Based on your sum assured and age, the insurer may insist on fresh medical check-ups as well.
Also, evaluate buying a fresh term plan. Over the past 5 years, term insurance rates have reduced substantially and you may find the new rates lower than your current term plan rates. The good thing about term plans is that there are no surrender charges if you stop the cover and shifting insurers is relatively easier.