Policy can be revived by restarting premium payment

Published in Mint on 30th Dec 2015, Written by Abhishek Bondia

I missed paying premium for a few months. Can I start paying again? Would there be any charges?
—Jayashankar

If you do not pay renewal premium within the grace period after the due date, the policy lapses. You can revive your policy by restarting your premium payment. Insurers charge interest on the unpaid premium for the overdue period. At the time of revival, insurers generally ask for a declaration of good health. They may also ask for additional medical check-ups. You may need to bear the cost of these medical tests.

I want to invest some money annually in a unit-linked insurance plan (Ulip). What are the parameters that I should look at when selecting a Ulip?
—Madhurya Kamath

You should consider the following parameters: a) Past returns: Every Ulip has multiple underlying funds, for example, equity, debt and so on. You should look at returns of these individual funds. This will also help you allocate your premium among various funds. b) Mortality charges: Ulip is a combination of life insurance and an investment product. High mortality charges will depress investment returns. c) Flexibility: Plans have in-built charges for switching between funds. If you want to actively manage your investments, then switching costs should be a consideration factor. Sum assured should be at least 10 times the premium so that you get full tax benefits on maturity.

Can my employer pay premium on my behalf?
—Jayesh Seth

Companies can pay life insurance premium on behalf of their employees. There are three different types of policies, which employers typically subscribe to.

One is group term life. This is a group policy for all employees. Premium is paid collectively for the entire group. In case of death, the benefit amount goes to the employee’s nominee. Whenever an employee resigns, the policy lapses; portability is not allowed to an individual product.

Then there is Keyman insurance. This is an individual plan meant for key personnel of the firm. These personnel are so critical that their absence will have an adverse affect on the firm’s profitability. Premium is paid individually for each person. Death proceeds go to the employer. If the employer wants, the plan can be converted into a normal term life plan. However, the sum assured will be underwritten again based on the personal earning capacity of the employee.

There is also employer-employee insurance. This is a mixed scheme based on the above two products. The objective is to provide benefit to select employees. The product is based on an individual term life. Death proceeds accrue to employee’s nominee. Its key advantage is that after the employee completes a fixed tenor, she can continue the plan in her own name. The employee gets the benefit of the rate that was fixed at a younger age.

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