Reader's Corner : Life Insurance

Is it possible for individuals suffering from chronic diseases such as diabetes to obtain a term life policy? 

In such a case where the customer is suffering from a chronic disease like diabetes, the insurer  will ask him to undergo prescribed medical tests. After the medical examinations the insurer’s medical underwriters will decide whether to accept the risk. Also, in some cases if the level of diabetes is on the higher side, the insurance company may charge a little higher premium and offer the policy.  

  

I am not satisfied with the services offered by my current life insurer. Is it possible for me to port my policy to another insurance company?

Unfortunately, you will not be able to switch to any other life insurer as porting of life insurance policy is not allowed yet.

What are the pros and cons of taking a health insurance policy with daily cash or fixed cash benefit when compared to an indemnity plan?

While an indemnity plan only pays for the actual hospitalisation costs incurred, a daily cash or fixed cash benefit plan pays a pre-defined fixed amount based on the number of days of hospitalisation. This is irrespective of the expenses one incurs. It complements an indemnity policy. The additional amount of daily or fixed cash can be used for paying expenses not covered under health insurance plan or indemnity plan. It also covers other miscellaneous expenses such as loss of income, leave without pay, minor hospitalisation bills, etc. Daily cash or fixed benefit policies are useful add-ons for protecting one’s finances at the time of hospitalisation. However, they are not a replacement for an indemnity cover.

Are there credit-linked insurance plans available for retail investors? My lender is asking me to buy an insurance plan from its partner, which is very expensive. What other options do I have?

Yes, credit-linked insurance plans are available for retail investors. The majority of life insurance companies offer it as a part of their group business. Some insurers offer them to retail investors as well. In your case, if you are finding the one offered by your lender’s partner company expensive, you can purchase it from any other insurer and assign it to your lender. There are essentially two key risks associated with any liability - that of untimely death or of succumbing to a critical illness. A life insurance policy, like a term plan, helps to mitigate the first risk. This ensures that the EMIs do not remain unpaid. If the borrower contracts a life-threatening disease, a term plan that has an add-on critical illness cover comes to the rescue. This will ensure that timely payments continue even when the borrower is alive, but is unable to earn. Hence, you should definitely opt for a term plan against the loan amount, preferably with a Critical Illness add-on cover. You can also opt for a decreasing term plan, such as the typical mortgage redemption plan, where the sum assured decreases every year by a fixed percentage, as the outstanding balance of your loan reduces. You can assign these policies to your lender.

I own a term insurance policy. Will I be eligible for any monetary benefit if I don’t die within the term period?

It depends on the kind of term policy you have purchased. Normally, there are two types of term plans. First is a pure term plan wherein if the life insured survives the entire term there isn’t any maturity benefit. However, in the second type, the life insured receives the total premiums paid, in case he or she survives the policy term. This sum is excluding the GST amount. Such term plans are called TROP (term return of premium) and are a tad more expensive than pure term plans. If you opt for the second type of term plan you will receive the total amount of premiums paid. 


The writer is MD & CEO, Aditya Birla Sun Life Insurance and Dy. CE, Aditya Birla Capital. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in