Readers' Corner: Life Insurance

Amitabh Chaudhry, managing director & chief executive officer, HDFC Life, answers your questions

I took a term insurance plan in 2012 for 10 years. I have already paid five instalments for this. As I have an another attractive insurance plan, I want to discontinue this policy. But, I am unable to locate the option to discontinue the plan on the insurance company's website. Also, I have not received any response to the e-mail queries I had sent. Kindly suggest the procedure and implications of exit?

You can discontinue paying the premiums (from the next due date) for the older policy in which case it will automatically be discontinued and the life cover will no longer exist. However, please note that in case you purchase a new policy afresh, the premium rates will apply for your current age which might be substantially higher than your existing premiums under the old plan. Further, you should also ensure that the condition of your health has not altered much from the time you purchased your existing policy. In case you have undergone a serious surgery or have been diagnosed with some illness, your application might be treated differently (rejected or accepted at a higher premium). We advise you to analyse these aspects carefully before taking any decision on the policy.

What are some reasons that my life insurance policy application could get rejected?

A life insurance policy application gets rejected mainly on the basis of your medical history, lifestyle that you are currently maintaining in terms of food and drinking habits as well as your occupation. Insurance companies will have reservations on hazardous occupations as well as acceptable limits of blood sugar, cholesterol etc. and applications with higher levels might be accepted at a higher premium rate or rejected outright.

Further, if any of your previous applications for life insurance has been rejected, it is likely that your subsequent applications might also get a similar treatment. In addition to these, income limitations are also used by insurance companies to ensure that they approve of policies which can be justified in terms of coverage. Applications with a high level of required coverage with low levels of income and assets might be rejected or accepted at a lower level of cover.

While filing up an online term insurance plan, I was asked if I am a smoker and whether I consume liquor. Then it also asked me the frequency. Do premiums differ depending on the consumption of alcohol or frequency of smoking?

While underwriting a life insurance application, the company assesses various risks that can affect the mortality, and habits and lifestyle assessment is part of the risk assessment process. Depending upon the quantity of consumption, the premiums might vary in comparison to the standard premiums. Some products do have differential rates for smoker and non-smoker applicants. The final premium would depend on the comprehensive assessment of risk.

If I have a life insurance cover in India and become citizen of a foreign country, will it still be valid if I continue to pay premiums?

The policy conditions are binding on the disclosures at the time of insurance proposal. Hence, if the policy is taken while the customer is a resident Indian, and he subsequently becomes a citizen of another country, the coverage will still hold good.
The views expressed are the expert's own. Send your queries to yourmoney@bsmail.in