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Published in Mint on 15th January, 2018. Written by Abhishek Bondia

Can I buy life insurance policies for my step children too?

—Jayanat Baliga
Yes, you can buy a life insurance for your step children. The legal relationship between the proposer and insured is relevant for the insurer. You need to establish that you are the legal guardian of the insured.

I had bought traditional life insurance policies for my children about 5 years ago. These are set to mature in the next few years. However, if at the time of maturity, my children are not in the country, will it cause any hindrance in redeeming the policy?

—Dheeraj Bhatia
Redemption for traditional life insurance policies is relatively straightforward. The insurer would ask you to fill a discharge voucher and return the original policy document. On receipt of these documents, the insurer will settle the maturity amount. You are not required to be physically present at the insurer’s office to redeem these policies. The maturity amount will be paid to your children if they are over 18; otherwise the amount will be paid to the appointee.

I have a term life policy that I want to discontinue. Should I simply stop paying the premiums or is there a procedure to stop the policy? Also, what is the disadvantage of simply discontinuing a policy versus writing an application to the insurer for this purpose?

—Pawan Manchanda
A standard term life policy can be discontinued by not paying renewal premiums. There are no disadvantages of not making a written application to the insurer. If you do not formally surrender the policy, you may be able to reinstate the policy at a future date. You would have to pay up the overdue premium and interest in that situation. A standard term life policy has no surrender value.
In case the term life policy carried any maturity benefits such as return of premium, then you should surrender the policy. Such a policy typically carries a surrender value. Unless you surrender the policy via a written application, you will not be entitled to receive the surrender value.

There is a lot of talk about women’s plans in the market these days. What are their advantages over traditional life insurance plans?

—Tanu Rastogi
Women specific endowment plans carry the same amount of risk and deliver similar returns as traditional life insurance plans. A few special add-ons are offered on some plans. These add-ons may include coverage for a newborn in case of congenital anomalies, or a lump sum payment in case of diagnosis of women-specific cancers.
To cover these eventualities, it is better to buy specific plans that cater to these issues. For example, a critical illness plan would cover major illnesses such as brain tumor and stroke, other than female-specific diseases. This would ensure comprehensive coverage.

What does DDD coverage mean in case of life insurance plans? Should I opt for these plans? Do I need to buy a normal health insurance plan after this?

—Name withheld on request
DDD is a common acronym used for Death, Disability and Disease. Some plans offer riders on life insurance plans for disability and critical illness. If the insured suffers a permanent disability or is diagnosed with one of the named critical illnesses, then the specified sum assured is paid. Generally, the sum assured for disability and critical illness would be lower than the overall sum assured of the policy.
Disability and critical illness plans are offered by general insurers as well. In most situations, the stand-alone plan of general insurers for such coverage is a better option than the riders attached to life plans. Often, general or health insurers are able to offer a wider coverage as well. For example, stand-alone personal accident plans may cover temporary total disability as well. Similarly, stand-alone critical illness plans may offer coverage for a larger number of illnesses. Life insurance plans have the unique advantage that the premium is fixed for the term of the policy whereas general insurance plans could change depending on age. I recommend you compare the specific plans for benefits and prices before making a decision.
Diseases referred to in such plans indicate critical illnesses. Hospitalization for other treatments and surgeries are not covered by such specific plans. You will need to buy a standard health insurance plan to cover medical expenses linked to other hospitalization. DDD plans are not a substitute for mediclaim plans.