Standalone plans are available at prices similar to riders

Published in Mint on May 20 2014, Written by Kapil Mehta

While buying a money-back policy, agents usually give a benefit illustration. How genuine are these?

—Kamini Ghoshal
When I hand a Rs.500 note to a shopkeeper, she invariably peers at it suspiciously. If she finds the right ink marks, holograms and dates, I get a smile and the tender is accepted.
A benefit illustration should be treated the same way. Look at it carefully—it should have guaranteed and non-guaranteed payments clearly marked out, death benefit separated from living benefits, and a professional look. However, the best check is that regulations require you to sign the illustration and a copy of the signed illustration to be sent to you along with the policy copy. If that does not happen, call the insurer for verification.
If the nominee of a policy is different from the legal heir, who gets the proceeds?
—Ankit Kapadia
If the life insured had left a valid Will, then that will be honoured. But, if there is no Will, the legal heirs are entitled to the proceeds. In terms of process, the insurer will not wait to determine who the legal heirs are. It will discharge its responsibility of paying the claim by paying the nominee. Legal heirs will then need to take the claim amount from the nominee.
How do I decide if I need a standalone cover or a rider?
—Hari Nair
You need to compare the quality of risk cover and price in the rider and the standalone plan. Take the popular critical illness rider as an example. You should look at the number of critical illness diseases covered, the number of years for which pre-existing diseases are excluded, and the price per unit of sum assured. Similarly, in the case of a personal accident rider, look at the kind of personal accident cover. Generally, I prefer stand-alone plans. In most cases, these have wider, more feature-rich cover at prices comparable to riders.
I am 38 and don’t have a life cover. My parents stay with me but aren’t dependent on me. My wife works and is covered for Rs. 10 lakh. How much insurance should I buy?
—Parag Jain
You should buy term insurance that covers you for 10 times your annual income. If you die, your family can maintain its lifestyle and annual savings for 10 years with no change. This is sufficient time for the family to plan its future.
Your parents may not be dependent on you financially today but may require your help in the future, perhaps with medical care. This makes a term plan for you even more critical. A Rs.1 crore cover for 30 years will cost about Rs.20,000 a year. Your wife should also buy an insurance for Rs.1 crore. This will be slightly cheaper than your plan because women get preferred insurance rates.

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