Life Insurance: V Philip

Last Updated: Wed, Oct 10, 2012 05:12 hrs

When is the premium of life insurance policy waived? Also, on which policies do they typically offer benefits?
There are certain life insurance policies that offer the benefit of waiver of premium. As the name suggests, this feature waives further renewal premiums that helps in creation of an uninterrupted corpus in case of eventualities like total disability, critical illnesses or death of the breadwinner, by which the further renewal premiums could not be paid. The insurance company further waives renewal premiums payable and the policy continues. The Waiver of Premium benefit is usually available as an in-built feature or as a rider with regular premium endowment and term plans.

I am 37 and don't have any health problems. Should I buy a life insurance policy with a critical illness rider or opt for a health cover?
Before zeroing in on a life or health insurance plan, it is important to understand their benefits. While health insurance will cover your medical expenses in case of hospitalisation, a critical illness plan or rider will provide a lump sum amount upfront on diagnosis of any of the listed critical illnesses, such as cancer.

For example, a critical illness cover of Rs 10 lakh will pay the lump sum amount upfront which can be helpful to meet the expenses during or after the treatment. On the one hand, a health insurance plan will take care of all admissible expenses incurred only during hospitalisation and certain days or expenses pre and post hospitalisation.

On the other hand, the purpose of life insurance is to secure the financial future of your family in case of your untimely death. A critical illness rider is to meet the interim expenses.

An ideal course of action, given the limited information you've furnished, is that you must have a term plan worth 8-10 times your annual income, along with an individual health plan. If you have any dependents then you should consider the number of dependants and their age while taking the health plan and increase the sum insured by 10-15 per cent every year. Evaluate your requirement before taking a critical illness plan.

I took an endowment plan five years before. I wish to surrender it. Is it possible to do so without losing any money?
If, due to any reason, you wish to surrender the policy, you should do so only as the last option. Surrendering a traditional policy will always attract a penalty, which means you would lose some money, depending on the number of years left in the policy term. In case of a unit-linked plan, you can surrender the plan after a lock-in period of five years, after which there is no penalty.

If you need the money, you can consider taking a loan against your policy. Insurers offer 80-90 per cent of the surrender value of the policy as a loan, depending on the terms and conditions. The rate of interest charged is usually cheaper than a personal loan.

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