Readers' Corner: Life insurance

To avail of a group insurance policy one needs to insure at least 50 employees, says Pankaj Razdan

How are the sum assured and death benefit for a life insurance policy calculated? In the case of a policyholder's death, will the family get both?
 
Sum assured of a life insurance policy is calculated on the basis age, gender, premium paying a term and the type of policy. For example, Shyam, a 36-year-old male opting for a traditional participating whole life insurance policy for a premium payment term of 15 years, will have a  sum assured of Rs 2.1 lakh for a premium of Rs 18,262. Whereas, Ram, a 46-year-old male opting for the same premium term, will pay Rs 18,674 premium for a sum assured of Rs 2.1 lakh. For Ulip (unit-linked investment plans) policies, the sum assured is calculated as follows: For a customer below 45 years of age, the sum assured is equal to the annual premium multiplied by 10 or policy term divided by two, whichever is higher. Whereas, if the policyholder is 45 years and above, the sum assured is equal to seven times of the annual premium or policy term divided by four, whichever is higher.
 
Likewise, death benefit is calculated in line with the following three parameters defined by The Insurance Regulatory and Development Authority of India  — sum assured + bonus (if any); 105 per cent of total paid premium or 10 times of the annual premium, whichever is higher, is paid to the policyholder. In case of the policyholder’s death, the family gets either the sum assured value or death benefit value, whichever is higher.
 
I run a housekeeping service and undertake cleaning of office buildings. I want to buy life insurance policies for my staff. For group insurance, is a minimum number of people required? If any of my employees quits, do I still have to pay premium? Can I transfer that to another employee? 
 
To avail of a group insurance policy one needs to insure at least 50 employees. However, some companies also offer two types of group policies — a normal where at least 50 employees need to be covered and a micro-group insurance policy where at least 15 people can be insured. You can opt for a micro-group insurance policy, for you have a minimum count of 15 employees.
 
If any of your employees quits, you will be able to transfer the insurance to another employee. It can be done at the time of yearly renewal, where you can notify the insurer with the revised list of employees to be covered. Premiums for such covers are usually charged on the average age of the group, which can be revised annually. 
 
My name is spelt wrongly in my life insurance policy. When I pointed it out, the agent said it was fine. But, at the time of claim, can it cause a problem? How can I change the name on the policy?
 
It is extremely important that all your basic information such as name is mentioned correctly in the policy document. Such errors can create unnecessary delays and also lead to rejection of claims if the information provided in the proposal is incorrect. Therefore, it is prudent that you immediately visit the nearest branch of the insurance company and request name correction. Carry documentation such as your PAN card or passport to authenticate the correct spelling. The branch office will help you get your name corrected immediately.

The  writer is MD  & CEO – Birla Sun Life Insurance. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in