Life Insurance: V Philip

I have both traditional and unit-linked pension policies bought one and three years earlier, respectively. Should I exit these plans for the new, improved ones? Or would I need to submit these in the wake of the new norms?
Life insurance is a long-term instrument and the benefits can be best reaped in the long term, irrespective of the type of product – traditional or unit-linked. As a thumb rule, you should stay invested till the product completes its tenure. In your case, you should continue with your existing plans.

Moreover, you would have bought the pension plans to create a retirement corpus. Thus, do not discontinue midway. The new norms on unit-linked pension plans would be applicable only on plans launched from the prospective date and will not impact plans already in force.

 

I have a life insurance plan for five years. Due to some financial troubles, I may not be able to pay the premium. What happens if I fail to do so? Should I surrender the plan?
In case you fail to pay the premium even within the grace period of 15 or 30 days, depending on the premium paying mode, the policy will lapse and impact the life cover after the grace period expires.

The terms and conditions of a life policy clearly explain the consequences of a non-payment of premium. In case of a traditional policy, the surrender value payable after the policy acquires paid-up value is mentioned in your policy bond. In a Ulip, depending on the product feature, there is an option called premium holiday, which can be availed for temporary non-payment of premium. In case of new Ulips, launched post September 2010, there is a concept called discontinuance of policy which can be availed.

However, if you wish to continue your life cover on the same policy once your financial troubles are over, you can revive the policy by informing the insurer and complying with the requirements. If you require some short-term funds, you can apply for a loan against the traditional plan.

Ulip plans also allow partial withdrawal. You may consider partial withdrawal towards regular premium payments. Do not surrender your policies for short-term troubles.