Published in Mint on May 21, 2017, Written by Abhishek Bondia.
My brother had bought a term plan on his life for Rs1 crore (more than 4 years ago). He had a wife and 2 children who were the beneficiaries. Both children were below 7 years of age. As his children were very young, I was made the nominee. However, a few weeks ago the entire family was killed in a car crash. As the nominee, can I file a claim even though the beneficiaries are no more? There are other legal heirs in the family, and my brother died intestate.
—Jagdish Khurana
Yes, you as a nominee are entitled to file the claim. You would however need to distribute the proceeds among the legal heirs. Since your brother died without a Will, legal heirs would be decided as per succession laws. If you are a legal heir, then you will be entitled to your share of the death benefit.
My husband suffered a stroke some weeks ago and died after a prolonged hospitalization. In the meanwhile, the due date for his term life insurance premium arrived and nobody remembered to pay it. Can the claim still be filed or will the policy be considered as having lapsed? What are the options for filing a claim?
—Savita Malik
After the due date of the policy premium payment, a grace period is allowed. The grace period is typically between 15 and 30 days, depending on the premium payment mode. If your husband died during the grace period, then the sum assured would be payable. The insurer would deduct the last premium due and settle the amount.
In select situations, insurers may allow concessions for claims that occur after the grace period is over. For example, if the premiums are paid for 3 years, then in the event of a claim within 6 months from the due date, an insurer may pay the sum assured after deduction of the unpaid premiums, with interest up to the date of death. However, a such concession for claims during the lapsed period are not universally applicable and are situation specific.
In your specific situation, you may want to represent that your husband suffered a stroke before the renewal date and this left you distraught, which is why the renewal was missed. If the time between the renewal date and your husband’s death is reasonably small, then the insurer could consider a special payment.
I have a 5-year-old daughter. Would a Sukanya Samridhi Scheme be a better saving instrument or should I consider a unit-linked insurance plan (Ulip) child plan?
—Bindya Warrier
Both are long-term saving instruments. The key difference is that while the first one is essentially a debt investment, the Ulip may give you options to invest in equity, debt, or a combination of both. In case you want to keep 100% exposure to debt, Ulips may offer a slightly lower return as the Government of India subsidizes the Sukanya scheme with a slightly higher interest rate. If you want exposure to equities, then you may consider Ulips.
The other difference is the holding period. The Sukanya Samriddhi scheme matures on completion of 21 years from the date of opening or whenever the girl child gets married, whichever is earlier, subject to the child being not below 18 years old.
Premature withdrawals are allowed in select situations with strict conditions. Whereas in the case of a Ulip, the policy allows for surrender after 5 years with 100% fund value. So, in terms of liquidity, Ulips may fare better.
I am 20 years old. Why should I not consider buying an accidental death plan in lieu of life insurance, when it is much cheaper?
—Inder Taneja
Insurance is meant to protect your family against uncertainties. At a young age, the likelihood of death due to a natural cause seems extremely low. However, it is not improbable. Young people do encounter critical illnesses such as cancer, heart illness, and stroke. These diseases could ultimately lead to death. An accidental death plan will not cover death due to illness.
Insurance companies realize that the probability of a young person dying due to natural causes is low. So, they charge a significantly lower premium at a young age. In fact, buying life insurance at a young age has two major advantages. First, you get a low premium, which gets locked for the term of the plan, says, over the next 30 years. Second, with age, people tend to contract lifestyle diseases. If you want to buy a policy, after being diagnosed with such an illness, insurers will charge you an extra premium to issue insurance.
