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Published in Mint on March 14 2017, Written by Abhishek Bondia

I have been getting a lot of promotional emails from various online portals, telling me about lucrative life insurance plans. How reliable is buying a plan online? What should I keep in mind before purchasing any life insurance plans online?

—Lavanya Rao
A standard term life insurance plan can have exactly the same benefits irrespective of the channel you buy it from. Buying an insurance plan online is safe. However, you need to be mindful of the features that you are opting for. Often, features are not understood before purchase.
Key features that you should thoroughly go through are: (a) term of the plan: rates are directly proportionate to the term—promotional emails generally cite low rates based on relatively short plan duration, (b) smoking status: life insurance rates are substantially higher for smokers—rates advertised are mostly for non-smokers, (c) riders: explanation of benefits of riders is sometimes sketchy.
For example, critical illness riders can be delivered as a lump sum payment or could just earn you a waiver of future premiums of the plan. Similarly, a disability rider could be delivered as an accelerated payment of the base sum assured or could be an additional amount payable over and above the base sum assured.
I recommend that you take a term life insurance plan with a term to cover at least till the age of 65. Duly declare your smoking status. Understand the riders before buying. You could also take the help of an insurance expert to understand the nuances and then purchase online.

I am 29 years old and my annual salary is Rs30 lakh. I have a loan liability of Rs45 lakh on my home. I wish to get a life cover of Rs5 crore for myself? I am ready to pay higher premiums. Is it possible?

—Pranjal Dubey
Yes, you should be able to get your desired life insurance of Rs5 crore. Typically, insurers allow a sum assured of 20-25 times of your annual income, depending on the person’s age. The multiple decreases with age.
If because of age or other underwriting reasons, you do not get your desired sum assured, you could buy a supplementary stand-alone personal accident policy. This would cover death due to accident and permanent disability.

What happens if both the nominees of a life insurance policy die before the policyholder? Can you introduce new nominees after buying a policy?

—Pradeep Nair
In case a nominee dies before the policyholder, a new nominee can be nominated in the policy. Policyholder can fill a change request form and submit to the insurer to make this change in the policy.

Seven years ago I had insured my domestic help for an amount of Rs10 lakh. Things were going fine all these years. However, last year there was a lot of domestic disquiet in her family and currently two of her children are accused of her murder. One of those children is the beneficiary of the policy. In case her children are found guilty, will they still be able to claim the life insurance amount?

—Nishant Ishwar
A standard insurance policy requires that the insurer pay the sum assured to the nominee. However, if the insurer suspects foul play, it can appeal to the courts to stay the proceeds. It is likely that court may ask the policy proceeds to be kept in its custody, till the final adjudication of the criminal case.

What is the core difference between a term plan and a unit-linked insurance plan (Ulip)? Is it advisable for me to surrender my Ulip to buy a term plan?

—Mukul Raghavan
Term plans and Ulips address different needs. Term plans provide a lump sum in case the insured dies during the policy term. The benefit of a term plan is received by the nominee of the plan. A Ulip is an investment instrument. Objective of the policy is to generate returns on the deposited corpus. The maturity proceeds are received by the insured. A Ulip also provides life cover; however, the sum assured is typically small.
Term plans are generally cheap. You may not be required to surrender an existing Ulip to buy a term plan. You should decide whether to continue or surrender the Ulip, independent of your decision to buy a term plan.