Take a term policy before closing your endowment so that your protection is well protected.
Why. I am a 40 year old male central government employee who is married and has two children. I was lured by a life insurance plan that pays me around ₹8,500 per month (from 2019) for a non-attractive sum insured. Having learned about investments recently, I want to discontinue the endowment plan and switch to a term plan which has a very high sum assured for low premiums. Please advise. I have home loan. Hence, I am not in the scheme of tax benefits
a. This is a sad story that is heard all the time. Time pressure to catch the tax deadline is common, due to a combination of seller pressure, taking the wrong policy, insufficient research at the right time and maybe. Combining risk cover and investment is inefficient and your idea of discontinuing the endowment and taking a term policy is a good strategy. Here are some inputs for you to accomplish this:
First understand the term policy concept. You get only death cover, there is no maturity value at the end of the policy term. Missing a single installment and the policy lapses. If you start a new policy then you will get higher premium as per your age.
Take a term policy before closing your endowment so that your protection is well protected.
If you have paid a pre-determined number of premium installments, your endowment policy will be eligible for surrender/paid up. The first means that your coverage stops and you can get back the residual value of your premiums. The latter means that you do not need to pay any more premiums, but the coverage continues at a proportionately lower Sum Assured for the policy term. Consider paying the premium till the policy achieves this status. If not, you forfeit the premium already paid. Whatever you lose, please don’t lose sight of the lesson that it is better to do research before buying a policy and not later.
Why. I work in a PSU bank and have corporate health insurance for ₹3 lakh provided by my employer. I have bought family floater health insurance for myself and my younger brother for ₹10 lac and got a separate individual top-up of ₹10 lac from the same insurance company with a deduction of ₹3 lac. Please clarify the following:
1) How to claim for top-up if 10 lakh sum insured of the primary insurance (family floater) gets exhausted
2) As under both the policies (Top-up and Family Floater), in most cases the claim should be reported within 24 hours, how can I know how much amount will be spent on the expenses.
3) If I report a claim for top-up and family floater at the same time, but if the claim does not exceed ₹10 lakh, will the insurance company treat my top-up policy as no claim or, Will the claim be treated as a claim as I informed and hence affect my no-claim incentive whereby my Sum Assured increases by 10% for every claim free year?
I also want to know whether reporting of a claim without any expense or payment by the insurance company and being a deductible on my policy, will result in loss on my no claim incentive
4) Can I show family floater in tax savings?
a. On hospitalization you can inform your insurer about an imminent claim under the basic policy, i.e. ₹10 Lakh Family Floater. During the course of treatment, when you see that your expenses are approaching your Sum Assured, like ₹8 lakh, you can inform the insurer about the possible claim under the top-up policy.
Your no-claim incentive, which will show up as an enhanced Sum Assured on renewal, will be affected only when a claim is paid. Mere reporting of the claim will not trigger it. In fact, even if you prioritize a claim and it is rejected outright, your no-claim incentive will remain in place.
Tax benefit under Section 80D of the Income Tax Act, 1961 is available on premium only to self, spouse, dependent children, parents and father-in-law.
Why. I am 27 years old. I had joined government service a year ago. I am trying to buy health insurance for my parents but am confused which type of insurance should I choose.
My parents are in the over 50 age group. Should I buy separate insurance for them or combined? Will I get tax benefit or not? Please guide me
a. To get started, please enroll your parents under your employer’s health insurance plan. Depending on the coverage it offers, you can take further insurance cover with commercial insurance companies.
As far as the insurance company plans go, it is advisable to take a joint policy for your parents and a separate one for yourself (in which you can include your spouse and children).
This is because the premium in a family policy is decided on the basis of the eldest member of the family.
Therefore, it is better to separate the older members into a separate policy and preserve the better rates for the younger members of the family.
You will also get Section 80D benefit for paying premium for your parents as well.
(The consultant is a business journalist specializing in insurance and corporate history)
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