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Published in Mint on Jul 18 2012, Written by Kapil Mehta
I am 28 years old. I plan to buy a term insurance of Rs1 crore. How are premiums for smokers calculated?

Most insurers have higher premiums for smokers because of the increased health risk. There is no standard approach and each insurer takes a different view of the risk. I looked at five low-priced term insurance policies for your age and requirement. Your policy should cost under Rs20,000 for a 30-year term. In general, the premiums for smokers are about 50% higher than non-smoking rates or about Rs6,500, including taxes. That’s a good incentive for you to quit smoking.
I have a life insurance which I bought seven years back. Now I want to add an accident rider to it. Is it possible? What should I look at before adding such a rider to my policy?
—C. Gola

It is possible. With most insurers, you can add a rider on the policy anniversary date up to a sum assured that is less than your base policy.
Accidental riders can cover several risks—accidental death, partial or complete disability and temporary or permanent disability. Ensure that at least death, complete and permanent disability is covered.
The critical illness rider is also extremely useful. It pays you a lump sum if you contract the 10-12 pre-specified diseases.
I have lost my life insurance policy. Can the insurer refuse to pay a claim to my nominee?
—Anil Mathur

You should immediately call up the insurer’s call centre and inform them that you have lost your policy. Make sure that you take a complaint number. Insurers generally pay the claim even if the policy is misplaced. However, the process is administratively much more cumbersome in that case. There have been instances where even the insurer has lost the details of the policy.
I bought a whole-life policy four years ago with an annual premium of Rs1 lakh. Now that I want to close the policy, the insurer says that I will be paid only half of the premiums I have paid. Can they do that?

The surrender charge in some traditional whole-life policies is very high, particularly in the early years of the policy. That is why you are getting only half your premiums back. There is not much you can do to recover more money. Instead take a decision on whether or not to pay future premiums by comparing the benefits you would get by continuing the policy with the benefits of surrendering, purchasing a term policy and investing the remaining amount in a good mutual fund or exchange-traded fund. In some cases, surrendering the policy at a loss makes sense.