life insurance: Kamesh Goyal

Recently, I read about life insurers offering universal life plans (ULPs). How different and beneficial are these plans vis-a-vis unit-linked insurance plans (Ulips) and endowment plans?
ULPs provide more flexibility as compared to traditional plans, in terms of the changing risk cover and saving the proportion of premium. However, the Insurance Regulatory and Development Authority has renamed these as variable insurance products (VIPs), and has formulated fresh guidelines. Unlike Ulips where policyholders can choose between funds to invest, VIPs manage a single fund exposed to various asset classes. Also, these declare returns periodically. Endowment plans are not flexible. For instance, regarding the option to pay additional premiums.

I had purchased a life insurance policy last year. But two months ago, when I wanted a loan against the policy, my insurer rejected my request, saying it was not eligible for a loan until three premiums were paid. Can I pay the next two premiums in advance and get the loan?
A loan against an insurance policy can be taken after it acquires the paid-up value, that is, after the payment of at least three annual premiums in case of a regular premium, irrespective of the premium payment mode. However, there are limited premium plans that may provide a loan before the completion of three years. Even if the premiums are paid in advance, the loan cannot be granted, as these premiums will acquire paid-up value only on the due date of the premium. However, in a single-premium policy, the loan is allowed when the policy acquires the paid-up value, and this depends on the terms and conditions of the plan.

How different is a whole-life policy from a term plan?
Both plans are structurally different. A term plan covers the policyholder for a fixed period, such as 10, 20 or 30 years, and the benefit is payable only on the death of the insured. A whole-life plan provides cover for the lifespan and gives saving benefits. It provides cover up to 80 or 100 years. In case the policyholder survives that age, the policy is terminated and the cash value is paid. A whole-life plan is available as both a traditional as well as unit-linked cover. However, term plans are available only in the traditional form.

My monthly pension, under a pension plan, from a private life insurer is due to start shortly. Is it possible to terminate the plan and buy a new, improved product in the market?
You can terminate the existing one and opt for a new product. For this, at the time of vesting of your pension plan, select the ‘open market’ option. Once you have selected the option, you can buy immediate pension or annuity plans from any other insurer, who is willing to provide it. However, evaluate the tax implications on the change.

The writer is the managing director and CEO of Bajaj Allianz Life Insurance. Send your queries to yourmoney@bsmail.in