Readers' Corner: Insurance Policy

I am 28-year-old. I have a term insurance policy of Rs6 million for 30 years. What would be the criteria for increasing my insurance cover? Would it also be possible to change the insurer and the term of my existing policy? 
 

As you wish to increase your existing cover, you will have to opt for a new term policy, in case your existing policy doesn’t have the increasing sum assured option. The benefit of portability is not applicable to life insurance policies yet. Changing the insurer for this particular policy, therefore, will not be possible. However, you can opt for another life insurance policy suitable to your needs from any insurer. This time you can choose the increasing life insurance benefit, which would be an appropriate option for you and would be hassle-free in future.
 

Due to non-payment of annual premiums for the last two years, my life insurance policy has lapsed. Is it possible to revive it?

You should check with your insurer immediately as the revival of a policy depends upon the lapse date and the type of policy. Usually, the revival period is two years from the policy lapse date.
 

I had purchased a moneyback life insurance policy at the age of 24 as part of my tax planning. I am now married with a five-year-old kid. How do I review my policy and know the desired sum insured which will protect us adequately?
 

It is important to understand that life insurance is not merely a tax-saving instrument but a critical financial protection tool. Insurance need increases as income and liabilities or responsibilities grow, and therefore it is prudent to keep reviewing one’s policy at every life stage. Your desired sum assured will depend on your annual income, liabilities, existing insurance cover, your current age and financial dependency of the family. Typically, the insurance cover should be 15-20 times the annual income. You should take all the above mentioned into consideration, evaluate your existing cover, and then opt for a suitable life insurance plan for adequate financial protection of your life, dreams and goals.
 

I am facing a cash crunch and need money urgently. My friend told me that I can avail loan against my life insurance policy. Is it possible?
 

Yes, a loan can be availed against specified life insurance policies once they acquire a surrender value. First and foremost, you will have to check with your insurer if your policy qualifies for a loan.
 

A loan can be taken against the surrender value of traditional or whole life insurance, but not against a term or unit-linked insurance plan. It is provided on a certain percentage of the surrender value. You will be charged interest on the loan amount declared by the company, based on prevailing market conditions.
 

Upon taking a loan you will have to continue paying premiums, or else the insurer may terminate your policy. Also, the loan should be repaid during the policy term.
 

I have purchased a critical illness policy from a life insurance company. In case I am detected with one, how can I get my claims?

In case a policyholder is detected to be having a critical illness, the claim settlement for critical illness policies is relatively simpler than for life insurance. You will require the specialist doctor’s certificate and other medical reports citing the detection. Once you contact your insurer and submit all the documents, the claim will be settled.

The writer is MD & CEO, Aditya Birla Sun Life Insurance. The views expressed are the expert’s own. 

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