Published in Mint on 15th July 2015, Written by Abhishek Bondia
I recently applied for a very high sum assured for term insurance. During the medical underwriting, I was diagnosed as a pre-diabetic. The insurer raised the premium by 150%. Is it common to put such a significant loading for pre-diabetes cases?
—Aravind
Insurers commonly reject or increase premium on proposals from diabetics. These risk decisions are generally guided by the handful of reinsurers operating here. Hence, it is likely that you will get similar feedback from other insurers as well. Premium loadings for diabetics vary from 50-200%.
The way insurers evaluate risk is different from the way doctors do. While a doctor may be quite comfortable with pre-diabetic conditions, insurers tend to be conservative in assessing the risk. You must, however, buy term insurance. If necessary, reduce the sum assured to make the premium affordable. If your conditions improve, you could buy more term cover.
I am diabetic and I applied for online term insurance along with an accidental death benefit (ADB) rider. The insurer loaded the premium by 100%. While loading the term insurance premium is understood, can it be done for ADB rider also?
—Arun Gupta
It is incorrect for the insurer to load the ADB rider premium, but then it retains the right to set prices. You can raise the issue with the authority but a speedier solution may be for you to drop the ADB rider. Instead buy a stand-alone accident insurance cover from a general insurer. These stand-alone accident covers do not require medical underwriting and come with additional benefits of accident disability. They are issued to you at standard rates.
I applied for term insurance but my policy was rejected because I had plans to go to Afghanistan. Doesn’t term policy have worldwide coverage?
—A. M. Das
Term insurance does have worldwide coverage, but insurers use immediate travel plans and past travel to underwrite. Planned travels to certain countries is on the negative list because of the risk. This list changes from time to time but if the country is on an insurer’s negative list, it will reject the proposal or propose a premium loading. Once the policy is issued, you will be covered worldwide without restrictions.
My pension plan is due to mature next month and I will get a monthly annuity thereafter. Will this be taxable?
—Ganesh
Annuity payments are considered to be a part of your taxable income. Receipts from annuity are not exempt under section 10(10) D. We need to see the fine print but based on recent budget announcements, with effect from October 2014, insurers will even deduct tax at source of 2% if the annual taxable payout exceeds Rs.1 lakh.