Select a life insurer with at least 85% claim settlement ratio

Published in Mint on 9 June, 2015, Written by Abhishek Bondia

Is there a life cover wherein I can get money during the tenor of the policy? How does it work?
—Vineet Goyal

There are life insurance policies that pay money during the tenor of the policy. Such plans are generally called “cash-back” or “money-back” plans. Under such plans, there is a pre-determined proportion of sum assured that is paid at regular intervals. Apart from the interim payments, such plans also have a maturity amount. Typically, the yield on such plans is 3-6%.
Unit-linked insurance plans also offer the option of partial withdrawal. Herein, you can take money out of the policy before maturity. These withdrawals are not pre-determined like in money-back policies.

I will turn 30 in August. I earn Rs.10 lakh a year and do not have dependants. I want to buy a life insurance policy. How should I zero in on the right policy?
—Prem Prakash Jaiswal

You should look at three factors. First, is the insurer. I am generally not comfortable with insurers having less than 85% claim settlement ratio. Second, I will recommend that you look at as high a term as possible. There are insurers that provide cover till 75 years of age. Third, you should look at the rates. Since the death benefit is exactly the same, you should go with the lowest premium option.

What is a survival period in a critical illness policy?
—K.L. Amarnath

A critical illness policy is a survival benefit policy. The survival period is the number of days the insured must survive after the illness is first diagnosed to become eligible for the benefit. Under this policy, a lump sum amount is paid to the insured on diagnosis of one of the specified diseases. If the person dies within the threshold survival period, then no amount is paid. Survival period varies from 30 to 180 days.
While choosing an insurer, you should consider the plan with lowest survival period. This will help in two ways. First, faster claim settlement. The insurer will settle the claim only after the completion of the survival period. So, shorter the survival period, the faster you can claim. This could become extremely vital for managing cash flows for expensive treatments. Second, most of the illnesses covered are life threatening. In case the insured does not survive the threshold period, there will be a burden of significant medical expenses without insurance support.

Upon maturity of my endowment plan, will the benefit be automatically paid to me?
—Anandita

Generally, maturity money is not paid automatically. You have to file a claims form along with bank account details. The insurer will then pay the maturity amount directly to the account. Some insurers collect bank details at the proposal stage itself, and pay the claim amount automatically.

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