Published in Mint on 18th June, 2017. Written by Abhishek Bondia
My husband works in Qatar as a doctor and has an insurance policy bought in India. Will the company honour the claim if he happens to die in a war zone?
—Adilah Kazmi
A life insurance policy issued in India covers death anywhere. Suicide is the only exclusion, that too in the first year. Death caused due to any reason i.e., accident, natural or war, is covered under a life insurance policy. So, insurers will honour a claim, should it arise. Do note that war is generally an exclusion for most general insurance policies.
So, a personal accident policy may not cover death caused due to war.
I have a term plan cover of Rs1.2 crore. I am planning to move to California and my family will still be staying in India. Will my cover be valid, if something were to happen to me, while in California? Should I inform my insurer about me moving out of India? Please explain the whole process.
—James Chacko
Term plans issued in India are valid worldwide. So, if an unfortunate incident happens while you are abroad, the policy will get triggered. The claim would, however, be settled in India and paid in Indian rupees. In terms of process, you should take care of the following.
First, clearly specify your nominee on the policy. Second, explain the claim documentation process to your nominee. A death certificate and other certification from local authorities would be required to file a claim.
An immediate planned travel questionnaire is required to be filled at the time of policy issuance. However, there is no requirement to inform the insurer about future travel plans once you have the insurance.
Can I take an insurance policy in my child’s name? She is working in regional soap operas, advertisements, etc and earns close to Rs8-10 lakh annually. How should we determine an apt insurance cover for her? Kindly help.
—Rahim Motwana
You should be clear on the objective for insurance. If you want your child to be financially stable if you were to die then buy insurance on your life and make her the nominee. If you are dependent upon your daughter’s income then buy a term plan for at least Rs1 crore on her life. I am assuming that your daughter is an adult over 18 years. If your purpose is to save money and build a corpus over the long term then buy an investment plan such as a ULIP. However, compare that to other investment options that may be available.
One of my oldest office staff died suddenly out of cardiac arrest. He was 35 years old. He is survived by mother, wife and a 5-year-old child. Is it possible to make any provision for his child such that it only accrues to him after 18 years of age? I do not want the money to be available to the guardians.
—Rajeev Meohi
You can buy a single-premium child plan. There are plans, which would mature only when the child attains 18 years of age. The only way a guardian can liquidate the plan beforehand is via surrender. If you buy a traditional endowment plan, the surrender charges would be high, and amount receivable in the hands of the guardian would be significantly lower than the maturity value or premium paid. In a unit linked child plan, surrender value would be equal to the underlying fund value after 5 years.
How can I buy a gratuity plan for my employees? How does it work?
—Deepa Kaushal
A gratuity plan is essentially an investment tool that helps you invest money that has been set aside for gratuity. It is mandatory for a firm to make a provision for gratuity but it is not mandatory for them to invest the provision in a gratuity plan. If the firm invests this provision in a gratuity plan, then they can claim the entire amount as a business expense and reduce their tax liability.
Most life insurers offer a gratuity plan. You would need to open a trust, which in turn would buy this plan. It is a straight forward process, and insurers help in step-wise implementation of the plan. Every year, the insurer would do an actuarial evaluation of your future gratuity liability, and ask you to fund accordingly. You would have an option to fund it altogether or in steps. The returns generated on the gratuity fund is tax-free. Whenever an employees leaves the company, you can make a claim with the insurer.