Published in Mint, December 4th 2013, Written By Kapil Mehta
What is the criterion to determine the eligibility of loan and repayment thereof under a life policy?
—Ketan
There are five requirements for determining the eligibility. First of all (and the most obvious), the insurance should have a loan facility. This feature is most common in traditional, participating insurances. Second, your insurance should have acquired a surrender value. Third, your loan requirement should be less than 90% of the surrender value. Fourth, you will need to assign the insurance policy to the insurer and finally, interest will need to be paid. The current interest rates are around 9%.
When is a payment made under a critical illness rider attached with a life insurance policy?
—Rahul Nayyar
Critical illness rider claims are generally paid after a waiting period of 90 days and a survival period of 30 days. Waiting period is the number of days after you first buy the insurance.
A critical illness diagnosed in the waiting period will not be paid. The purpose of a waiting period is to prevent people aware of their critical illnesses deliberately purchasing the said rider. Survival period is the number of days after making a critical illness claim that the insured must survive to get the benefit. If a person is diagnosed with a critical illness but dies within 30 days then the critical illness benefit is generally not paid. Instead, the term insurance benefit becomes due. There are exceptions as some insurers are introducing critical illness plans without the survival requirement. I prefer that structure because it is more customer friendly and removes the ambiguity around how the 30 day period should be defined—from the day the disease was diagnosed or reported to the insurer.
What are the rights of the nominee of a life insurance policy in case something happens to me? What about my legal heirs? Can they dispute my nomination?
—Sajid
If you die without a will, the insurance proceeds will be paid to the nominee but your legal heirs can rightfully claim their share under succession laws.
This issue was clarified by the Supreme Court in 1983 in the Sarabati Devi versus Usha Devi case, where the court ruled that the laws of succession supersede a nomination made under the Insurance Act of 1938. This ruling has been upheld in several instances after 1983. The best solution is to write a will clearly specifying the beneficiaries of your insurances.
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