Surrender value depends on the type of insurance bought

Published in Mint on 4th Nov 2014, Written by Abhishek Bondia

How does one go about renewing a life insurance policy online?
—Rehmat Amir

Each insurer has its own process for renewal. Not all insurers provide an online renewal option. A few insurers have a simple process. They ask for the policy number and date of birth of the policyholder. Once verified, you can make premium payments against such policy number.

I have not paid premium for some time. I want to discontinue my insurance policy. Do I get anything back from the insurance company?
—Sulagna

The process of discontinuing the policy before end of policy term is called surrender. The surrender value depends on the number of years of paid-up premium, underlying cover and investment scheme. For instance, a normal term plan has zero surrender value. Traditional plans will generally levy a charge for premature closure. You should enquire about the current surrender value in your policy from your insurer’s customer service department.

My company wants to buy an individual life insurance policy for me? In case of death, will my family get the benefits?
—B. Srinivasan

If a policy is issued under the employer-employee scheme, then the beneficiary is the employee for survival benefits and her family for death benefits. If the policy is issued under the keyman scheme, then the beneficiary is the employer.
Employers are increasingly choosing to provide life insurance cover for employees through the employer-employee scheme rather than the traditional group term life. This has two advantages: a) The individual policy can be assigned to the employee when she leaves, and b) the premium is fixed for the term of the policy.
Keyman insurance is taken particularly for employees whose sudden demise will significantly affect the overall profitability of the firm.

What is the difference between nomination and assignment?
—Chander Ahuja

Under nomination, the beneficiary gets the proceeds of the policy if the insured dies. In case of assignment, any proceeds, both survival and death benefits, are passed on to the assignee. Survival benefits include maturity payments and interim payments such as cash back under endowment policy. Assignment supersedes any past nomination.

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