Readers' Corner: Life Insurance

I want to make my brother’s daughter as a nominee for my life insurance. I am in the process of getting separated from my wife. What is the procedure to change nominee? If something happens to me, will the nominee receive the money or can legal heirs stake a claim to it? 

As per insurance guidelines, you can appoint anyone as your nominee or can change your current nominee at any point in time. You will have to just intimate your insurer through a written request wherein the insurer might ask you to give a proper reason behind the choice of your nominee. In case the nominee is a minor you will have to mention an appointee’s name in the request.

As per the revised insurance regulations, only nominee will get the benefit of the policy and the legal heirs would not be able to claim anything.  

I was diagnosed with stomach ulcer recently. I am also planning to buy a term plan. Will the insurer charge me extra premium if I disclose this?

While purchasing a term plan, it is mandatory to undergo medical check-ups followed by which the medical underwriting team works on the policy proposal and decides the premium basis the medical reports. The premium for your plan will depend on your medical examinations and your existing health conditions. However, it is always prudent that you declare all your health conditions at the time of buying the policy, as hiding pre-existing diseases can lead to rejection of claims. 

My term plan is inadequate and I wish to buy a new one. Is it possible to top-up life insurance term plans?

Top-up policies for term plans are not available in the market today. You can always opt for a new plan to increase your cover. However, as you are aware of the need for increasing life cover, the best option for you will be to purchase an increasing term insurance plan to avoid the hassle of underinsurance in future. In such plans, the sum assured chosen at the plan commencement increases every year by 5-10 per cent for a constant premium. It will help you keep a check on inflation as well as other changing financial situations in the later years of your life.   

I have read of legal battles between the nominee and legal heirs if they are not the same. Is assigning a life insurance policy to any individual of my choice possible, like it happens in Married Women's Property Act?

A policyholder has the right to nominate any individual as his or her nominee. However, if the nominee is not an immediate family member, the policyholder is required to provide valid clarification pertaining to the choice of the nominee. While there is no particular act owing to nominating nominees, however, your legal heirs will not be able to claim any portion of the claim amount unless they produce prohibitory order from the court of competent jurisdiction. 

I have a life insurance product that was bought when I was working in India. I was deputed to the US by my company. I am planning to take the permanent residency (PR) and then citizenship. I have two questions. One, are life insurance policies valid abroad. Two, if they are, will I continue to get cover when I get a PR and then citizenship?

Yes, most of policies purchased in India are valid abroad. The US is recognised by almost all life insurance companies in India. However, the validity also depends on the product and the insurance provider. Therefore, it will be prudent for you to check with your insurer before you go abroad. To answer your second question, you will still continue to get the cover even if you become a PR and get US citizenship, as the insurable interest of a policyholder stands true at the time of inception of the policy. Since at the time of purchase you were an Indian citizen, the insurer will honour your policy even when you change your citizenship. 

I have read of legal battles between the nominee and legal heirs if they are not the same. Is assigning a life insurance policy to any individual of my choice possible, like it happens in Married Women's Property Act?

A policyholder has the right to nominate any individual as his or her nominee. However, if the nominee is not an immediate family member, the policyholder is required to provide valid clarification pertaining to the choice of the nominee. While there is no particular act owing to nominating nominees, however, your legal heirs will not be able to claim any portion of the claim amount unless they produce prohibitory order from the court of competent jurisdiction. 

What is the difference between a child plan and other investment-cum-insurance products? What are the unique features that child plans have that other products don’t?

Child plans are customised to secure your kids’ future goals and ensure financial protection of their important milestones. The unique and critical feature of such a plan is the default waiver of premium benefit. It ensures continuity of the policy and waives of all the remaining premiums should anything happen to you. While child plan is specifically meant to protect your child’s dreams and goals, other investment cum insurance product can be opted to secure other goals of your life, which can vary from buying your dream house, travelling abroad to contributing to social welfare. In such products, one can opt for the waiver of premium feature, but at an additional cost. In a child’s plan, this benefit comes inbuilt and you do not have to spend any extra money for the same. It is thus important to note that every policy has unique benefits to offer at each life stage and you should have a combination of these to protect you and your family’s life against uncertainties completely.

My wife got a life insurance policy from an agent. We are in different cities at present. When she received the policy, it was not the promised one. The details such as name and phone number mentioned in the policy are incorrect. I immediately asked her to visit the office of the insurer and surrender the policy in the free-look period. But the executive assured her that they would change everything. More than a month has passed. No change has been done. The executive who promised the changes has left the job. New ones say that they can’t do anything as the free-look period is over. At best they will make the corrections. But cancelling the policy is not possible. What should I do?

In case you want to change your existing policy to the one you intended to purchase, you can write a letter to the insurance company and can get the changes done. However, if you have decided to cancel the policy and the company is not cooperating, you may register your grievance or complaint with the customer care unit of the company and in case you are dissatisfied with the decision/resolution of the company, you may approach the ombudsman.  

I am planning to take an annuity with part of my retirement money. But I am confused with the options on offer. How do I select the best option for me?

You will have to evaluate the options basis your retirement needs. In case you need a continuous flow of a certain amount of money until you are alive, you should opt for lifetime annuity plan. Suppose, you want money for yourself and want to continue the flow of money for your nominee post your demise, you should take lifetime annuity with return of purchase price. This option will ensure that you get a specific amount until you are alive, after which your nominee will continue to get money which equals the annuity purchase price. If you need money for a limited period only, you can opt for a limited period annuity. While, if you aim to ensure your spouse’s financial protection, with or without you, it will be prudent to opt for the joint life annuity where you will get a certain sum till you are alive. Post your demise your spouse will continue to get half of the sum that you were receiving.

The writer is MD & CEO – BSLI & Dy. CE – ABFSG. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in