Life Insurance: V Philip

Both my lower limbs are polio-afflicted. However, I am sufficiently independent and the physical disability does not affect my mobility. Recently, I applied for a term insurance policy. A life insurer has stipulated a premium that is 60 per cent higher than the premium applicable for a person with no disability. I wish to know the reason behind the perceived higher risk for my life. Also, is it a standard practice to charge a higher premium for the disabled, depending on the severity of disability, or is it at the discretion of the underwriter?
At the outset, personally, I do not believe that physical ability or disability can be a limitation for any individual, whose inner resolve is powerful enough to surmount the various challenges posed in life. Insurers refer to the mortality table for arriving at the premium rates. This table is usually prepared for standard lives. Any deviation from the standard norms is regarded as non-standard and the weightage given to such deviations, in terms of physical disabilities, depends on the insurer’s underwriting guidelines. Generally, insurers classify disabilities into mild, moderate and severe and perceive disability to carry higher risk than a normal person. Various insurers perceive this risk differently and charge loadings according to their guidelines. The individual underwriter in any office has to follow it. However, there are some insurers who offer certain products for them under their ability insurance programme, without any or minimum loading charge.

I wanted to opt for a fund switch in my unit-linked insurance product (Ulip), but the company asked me for options between switch and re-direction. What is the difference between the two?
Switching and premium re-direction are two different methods of managing your investments in various funds. You have an option to change your current investment and opt for further investments in the same policy. A fund switch enables you to shift the existing units in your Ulip into a new fund, but will not change your future premium allocation.

Some products offer free unlimited switches throughout the policy term. In case you are not very market savvy, or want a hassle-free option of maximising your returns, you can choose the asset allocation fund, which dynamically switches funds. The switches are managed by the insurer’s fund manager with the same objective of maximising returns for you.

Some insurers have a portfolio strategy such as ‘wheel of life’, which manages the investment of the units in a pre-defined manner with automatic switches, by gradually exposing towards a mix of debt and equity, according to your outstanding term. However, a premium redirection will enable you to change the premium allocation for all the future premiums of your policy. Your existing units will not be shifted into a new fund. If you are looking for creating wealth for the long term, it is advisable to adopt both methods to balance your investment exposure.

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