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Published in Mint on May 17 2016, Written by Abhishek Bondia
Is it possible to change the frequency of premium payments from monthly to annual?
—Kaushal Verma
Yes. You can change the frequency of premium payment. You would need to place a written request with your insurer for it. Typically, such changes are incorporated on the policy anniversary date. Your premium may come down a bit when you opt for annual payment.
Could you tell me how can I dematerialise (demat) my insurance policy? What are its advantages?
—Reshmi Nair
The first step to demat your existing insurance policies is to open an e-Insurance Account (eIA). An eIA is opened with a designated insurance repository. A customer can have a single eIA, which will store all demat life insurance policies across all insurers. Then apply for demat of existing insurance policies with the concerned insurer. For all new policies, you can request for a demat version at the proposal stage itself. The major advantages of demat life insurance policies are safety and convenience. It cuts the risk of physical damage as in the case of paper policies. All the customer’s policies across insurers can be accessed from one place. In case of a change in know-your-customer (KYC) details, the customer needs to make the change only in eIA. Buying a new insurance policy becomes easier as the customer does not have to go through the KYC process again if the eIA account exists.
How should one decide on how much life insurance one should take? I am a 35-year-old unmarried woman and earn around Rs.90,000 a month.
—Rena Jha
A life insurance policy is meant to provide financial support to your dependents in case of your death. The sum assured should be sufficient to pay off your debts, and any major obligation or liability. Additionally, it should be able to provide a stream of income to cover for living expenses of your dependents.
This will ensure that in your absence the financial need of your dependents is taken care of. As a thumb rule, a sum assured equal to 10 times a person’s annual income is considered ideal for life insurance. In your case, you should buy term cover if you have dependents.
Is portability allowed in life insurance? Can I switch insurers in the middle of my policy?
—Hemant Singh
Portability is not allowed in life insurance because these are long-term contracts. But it is possible to switch insurers in many cases. For traditional plans, there is typically a surrender charge if you stop an insurance mid-term, so switching can be expensive. For unit-link insurances, you can withdraw the funds after five years at no charge and reapply to another insurer. In term plans, you can simply stop paying premiums if you want to change insurer because there is no surrender charge.