Life Insurance: Deepak Sood

Last Updated: Mon, Sep 10, 2012 05:31 hrs

Online term plans are usually considered hassle-free purchases and offer large coverage at an economical price. Is the sum assured or cover higher as compared to offline products ?
Online term plans are sold directly to the customers and have some advantages. An individual can apply for the policy and pay premium for it online at any time of day. No intermediary is involved, due to which online policy purchase is faster. Further, insurance company also saves some cost, the benefit of which is passed on to the customer in the form of lower premiums. The result being, sum assured may be five-six per cent higher under online term plans ,compared to the ones offered through some intermediary. However, if purchase is made through a reliable agent then there are other advantages like, more and clear information about insurance plans, need analysis, expert advice and personalised services, too.

Some insurers offer a guaranteed 5-10 per cent cash back on sum assured with a cash bonus. Does a cash back help lower the annual premium? Also, will sum assured remain the same in this case?
Guaranteed cash back is a sort of survival benefit. Cash back may depend on the surplus declared by the insurer on its with-profit fund. The cash bonus, therefore, is not guaranteed and will vary from year-to-year. It generally increases in absolute terms as the reserve of the policy increases with the policy approaching maturity. Cash back and cash bonuses may be used by policyholders to reduce premiums, though sum assured is not affected and remains unaltered.

In the absence of pension plans, which plan would you advise to accumulate a post-retirement corpus?
For building a post-retirement corpus, you may select any endowment plan (traditional or unit-linked insurance plan (Ulip) according to your risk appetite) that will provide a lump sum amount at maturity, besides life insurance cover during the term. This lump sum amount can be used to purchase an annuity for life.

Alternatively, a series of endowment plans of different terms may be purchased such that one policy matures every year starting from the year of retirement with payment of premium limited till your retirement.

The last such policy may mature at the age of 70 or 75 when you may purchase an annuity. A Ulip plan of maximum available term may also serve the purpose where you may withdraw amounts systematically every year after your retirement and at maturity you may purchase an annuity for life from the available corpus. You could also choose to pay premiums in such plans till your retirement.

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