Life Insurance: Deepak Sood
I have one pension plan from a life insurer and one under the new pension scheme (NPS). Which of the two is better, by way of returns and features?
NPS is similar to the pension plans offered by insurers, but there are additional features like tier-II account (which provides flexibility to withdraw). Although the retirement age is fixed at 60, insurers offer flexibility in selecting it. NPS provides for 60 per cent of tax-free withdrawal at the age of 60, whereas pension plans have a limit of 33 per cent of the corpus. In the case of NPS, the current charges are much lower, compared to the pension plans.
Insurers offer both traditional and unit-linked pension plans. NPS has a Tier-I account from where contributions cannot be withdrawn, and a tier-II account that permits withdrawals anytime. But, you need a Tier-I account to open a Tier-II one.
Traditional plans generally give guaranteed returns and bonuses, whereas unit-linked ones provide a mix of guaranteed and market-linked returns. NPS, however, does not guarantee returns.
When urgent, you can withdraw from traditional plans for a surrender value. Unit-linked plans allow taking one-third commuted value and purchasing annuity for the balance. Before attaining 60, NPS allows withdrawing 20 per cent of the savings and buying annuity from the rest.
When is the payment made under a critical illness rider attached to a life insurance plan?
A critical illness (CI) rider benefit is payable to the insured on diagnosis of any of the covered illnesses. Any illness not mentioned in the policy is excluded from the policy benefit. A waiting period generally applies. That is, if critical illness is first diagnosed within a specified number of days from the risk commencement date, the claim may not be payable.
Further, a survival period also applies in the case of CI claims. Which means the life insured has to survive a minimum specified period after the diagnosis of the critical illness to be eligible for the CI benefit. The number and types of illnesses covered under the rider vary from insurer to insurer. Hence, you need to carefully select the critical illness cover.
The writer is managing director and CEO of Future Generali Life Insurance. The views expressed are his own. Send your queries to yourmoney@bsmail.in