There is no surrender value with a typical term insurance plan

Published in Mint on 8 September, 2015, Written by Abhishek Bondia

Can I surrender my policy before maturity? How do I go about doing this?
—Rajesh Patil

Yes, you can surrender a policy before maturity. You will get the surrender value. In a unit-linked insurance plan (Ulip), surrender value is linked to the net asset value (NAV) of the units held. Depending on the number of years of paid-up premium. Ulips have a deduction schedule on the NAV. For endowment plans, a surrender value table or the formula for arriving at surrender value is mentioned in the schedule of the policy. A typical term plan has no surrender value.

am 40 years old, unmarried and earn Rs. 20 lakh a year. I want to get myself a life insurance policy. How do I know how much insurance amount I should take?
—Kanika Mehta

A thumb rule to quantify life insurance requirement is 10 times a person’s annual income. However, a lot depends on the number of dependants of the individual and her financial liabilities. Your life insurance amount should be enough to settle all loans against your name, and ensure that your dependants get enough corpus to sustain themselves later.


As a company, can we buy investment-linked insurance policies for our employees’ minor children?
—Shyam Dutta

You can buy an employer–employee insurance. In this insurance, the employer pays for insurance that is on the life of an employee. The nominees of that insurance could well be the employee’s children.
In an employer-employee insurance, the insurance can be in the name of the employee, and the company just undertakes to pay the premium. Or, the insurance may be owned by the company and assigned to the employee after certain conditions are met. For example, the employee has to work for a certain number of years.

What is a survival period in a critical illness rider? How does it affect my life insurance?
—Janaki

A survival period is a waiting period after the diagnosis of the critical illness for the claim to become payable. If the insured dies before the waiting period is over, the claim is not payable. Typically, the waiting period is between 30 days and 180 days. There are a few critical illness plans available that do not have a survival period requirement.
In case critical illness is purchased as a rider on the life insurance, and the insured dies within the waiting period, then only the death benefit would be payable. However, if the person dies after the waiting period on critical illness, then both amounts becomes payable.
Do note that if the critical illness is an accelerated rider, then the total amount payable is only the life insurance amount. Here, the critical illness rider only accelerates the amount payable on life insurance.

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