Term Life & Keyman

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Published in Mint on Nov 25 2016, Written by Abhishek Bondia

I want to extend my life insurance cover to include my wife. Should I go for it or would it just be better to get another plan instead?

—Atul Shandilya
Yes, you should get a separate plan for your wife. There are limited options available for joint life plans.
The individual plans are relatively more economical in terms of premium and are easier to administer.

I have lost or misplaced my policy docket. What should I do?

—Tushar Kapadia
Inform the insurer about the loss immediately. Then request a duplicate policy copy.
The rights and privileges of the duplicate copy are the same as that of the original policy. The process of getting a duplicate policy varies by insurers. Sometimes, the insurer could ask you to submit an indemnity bond on a stamp paper and pay the administrative charges for the duplicate copy of the policy.
Some insurers may ask you to place an advertisement in a local newspaper and also submit the proof of its publication to the policy-issuing office. Increasingly, insurers are simplifying the process of replacing the lost docket. A few insurers automatically create an insurance depository account, so that an e-policy is always available.

When choosing a life insurance cover, how important is the reputation of the insurer?

—Hariharan Neogy
In case of term insurance, the claim has to be filed by your nominee. You will not be there to present your case. So, you would want to ensure that the claim settlement process is hassle free for your nominee. That’s why, the claim settlement track record of an insurer gives critical information about the insurer’s approach towards claims. I recommend insurers with a claim settlement record of 90% or more.

I missed paying premium on my term plan for a few months. Can I start paying again? Would there be any charges?

—Harsh Raut
If you do not pay your premiums within the grace period after the due date, typically 30 days, the policy is considered lapsed. You can revive a lapsed policy. For revival, you need to pay the unpaid premiums along with interest. Generally, if the revival is done within 6 months of lapsation and the sum assured is low, then a simple health declaration is also required.
In other cases, depending on the sum assured, the insurer may conduct fresh medical underwriting.

What is a fund switch? How many switches can I get?

—Rajesh Shah
A unit-linked insurance plan (Ulip) works on underlying funds that have varying levels of equity and debt exposure. At the time of policy inception, allocation of money among different funds is fixed. Later, money can be moved from one fund to another.
This money movement is called ‘switch’. You also have the option of specifying whether future premiums only should be invested differently or current funds accumulated should also be transferred.
Technically, most plans allow unlimited switches, albeit with a charge. Several plans allow up to four free switches a year, while some may allow unlimited free switches.

What is the best portfolio strategy to adopt for a Ulip?

—Rajat Kukreja
Portfolio strategy for a Ulip depends on one’s risk appetite. You can choose a combination of funds with equity and debt exposure. The common principle is to invest more in equities if you are young. As you grow older, go for debt funds as they are safer and less volatile. Several Ulips offer an automatic portfolio re-balancing facility based on pre-set allocation of equity and debt linked to one’s age.

Can I avail a loan on my life insurance policy? Is this a special benefit for specific types of plans? I got an SMS stating loan facility as an exclusive benefit for a life insurance plan.

—Arvind Swamy
Traditional endowment products that carry a surrender value offer loan facility.
A standard term life insurance policy does not carry any surrender value, hence does not have loan facility.
Ulips carry a surrender value, but do not offer loans.
Typically, loan is offered for amounts less than the surrender value of the policy at the time of loan application.
Endowment plans typically deliver a return of 2% to 4%. Loans are extended to policyholders at higher rates. Don’t invest in endowment plans just to avail a loan.
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