Anuj Agarwal, MD & CEO of Bajaj Allianz Life Insurance, answers your questions
Recently, I realised I had been mis-sold an insurance product. I was sold a traditional product in early 2010 when I wanted to buy a term plan. I have put in around Rs 1.30 lakh in the policy. I do not want this policy now. Should I exit the plan or stop paying the premiums?
According to Irda regulations, you have the option of cancelling your policy within the 15-day free-look period. The insurer is bound to refund the premiums paid after certain mandatory deductions, in case you feel you have been mis-sold an insurance product.
The second step is to read the terms and conditions mentioned in the policy bond and inform your intermediary or insurer if there is any discrepancy within the first 15 days of receipt of the policy bond. Most insurers have a 24-hour call centre or a welcome/verification call facility to register such grievances. Policy terms and conditions are also reiterated during such calls. You can highlight, during such calls, if there are any discrepancies.
I would strictly advise against exiting the life insurance plan. Exiting prematurely from a traditional plan is usually after a heavy penalty. More, your policy probably must have just completed three years, according to the information provided, so it may attract heavy penalty due to early exit. Instead it is recommended you continue with this plan if it meets your other financial goals, since a traditional insurance plan is also a sound financial instrument.
If planning to exit because of an urgent fund requirement in the near term, your traditional endowment plan can come in handy. You can avail a loan against your policy and at a cheaper rate than what personal loans offer.
My application for a home loan got approved recently. The bank has offered me a life insurance cover with the loan. Should I opt for it or apply for one separately? Which one would be advantageous in terms of features and cost?
Usually, life insurance plans offered with a housing loan are term plans with decreasing cover. That is, the sum assured decreases every year, as it is tied up with the loan amount still payable. It is always a good idea to evaluate the features of such a plan being offered vis-à-vis the cost involved and decide. More, such plans should be consistent with your financial goals.
However, there is one disadvantage when you have a life insurance plan tied with your home loan. You may lose the life cover in case you plan to transfer your home loan to some other provider. So, it would be a better option to have a standalone life insurance cover in such cases.
When buying an insurance product, should one opt for a single premium product or a multiple premium product?
Buying an insurance product is primarily driven by factors like the amount of cover one is seeking, premium paying affordability, fulfilment of life stage goals like child's education, wealth creation, etc., and finally on whether it meets your desired financial goals. While a single premium product has the convenience of one-time payment, a regular premium paying plan will help you acquire the desired corpus by paying small amounts of contributions every year. Usually, single premium products are considered whenever there is a sudden surge in investible surplus funds. While opting for single premium product plans, also consider the prevailing interest rate, so that you are not at a loss.
I own a health policy of a life insurance company. I am not happy with its services. How do I port the policy to some other insurer?
As of now health policies issued by a life insurance company are not portable to another insurer. This feature is available only for health policies issued by general insurance companies.
An agent trying to sell a unit-linked plan to me said I need to pay only three annual premiums. But doesn't the product come with a five-year lock-in? Should I opt for this product?
All unit-linked plans launched after September 2010 would have a lock-in period of five years. There is no unit-linked product in the market with three-year paying term. Usually, the policy paying term is a single or regular premium. Assuming you pay premium only for three years and not further, your fund value shall be subject to discontinuance penalty and will not participate in the market, as in the new unit-linked plan guidelines. Your life cover will also cease to exist in a discontinued policy. In any case, it is always advisable to pay for the full tenure of the policy, as to avail of the full policy benefits and also ensure your fund value returns are optimal.
Recently, I realised I had been mis-sold an insurance product. I was sold a traditional product in early 2010 when I wanted to buy a term plan. I have put in around Rs 1.30 lakh in the policy. I do not want this policy now. Should I exit the plan or stop paying the premiums?
According to Irda regulations, you have the option of cancelling your policy within the 15-day free-look period. The insurer is bound to refund the premiums paid after certain mandatory deductions, in case you feel you have been mis-sold an insurance product.
The second step is to read the terms and conditions mentioned in the policy bond and inform your intermediary or insurer if there is any discrepancy within the first 15 days of receipt of the policy bond. Most insurers have a 24-hour call centre or a welcome/verification call facility to register such grievances. Policy terms and conditions are also reiterated during such calls. You can highlight, during such calls, if there are any discrepancies.
I would strictly advise against exiting the life insurance plan. Exiting prematurely from a traditional plan is usually after a heavy penalty. More, your policy probably must have just completed three years, according to the information provided, so it may attract heavy penalty due to early exit. Instead it is recommended you continue with this plan if it meets your other financial goals, since a traditional insurance plan is also a sound financial instrument.
If planning to exit because of an urgent fund requirement in the near term, your traditional endowment plan can come in handy. You can avail a loan against your policy and at a cheaper rate than what personal loans offer.
My application for a home loan got approved recently. The bank has offered me a life insurance cover with the loan. Should I opt for it or apply for one separately? Which one would be advantageous in terms of features and cost?
Usually, life insurance plans offered with a housing loan are term plans with decreasing cover. That is, the sum assured decreases every year, as it is tied up with the loan amount still payable. It is always a good idea to evaluate the features of such a plan being offered vis-à-vis the cost involved and decide. More, such plans should be consistent with your financial goals.
However, there is one disadvantage when you have a life insurance plan tied with your home loan. You may lose the life cover in case you plan to transfer your home loan to some other provider. So, it would be a better option to have a standalone life insurance cover in such cases.
When buying an insurance product, should one opt for a single premium product or a multiple premium product?
Buying an insurance product is primarily driven by factors like the amount of cover one is seeking, premium paying affordability, fulfilment of life stage goals like child's education, wealth creation, etc., and finally on whether it meets your desired financial goals. While a single premium product has the convenience of one-time payment, a regular premium paying plan will help you acquire the desired corpus by paying small amounts of contributions every year. Usually, single premium products are considered whenever there is a sudden surge in investible surplus funds. While opting for single premium product plans, also consider the prevailing interest rate, so that you are not at a loss.
I own a health policy of a life insurance company. I am not happy with its services. How do I port the policy to some other insurer?
As of now health policies issued by a life insurance company are not portable to another insurer. This feature is available only for health policies issued by general insurance companies.
An agent trying to sell a unit-linked plan to me said I need to pay only three annual premiums. But doesn't the product come with a five-year lock-in? Should I opt for this product?
All unit-linked plans launched after September 2010 would have a lock-in period of five years. There is no unit-linked product in the market with three-year paying term. Usually, the policy paying term is a single or regular premium. Assuming you pay premium only for three years and not further, your fund value shall be subject to discontinuance penalty and will not participate in the market, as in the new unit-linked plan guidelines. Your life cover will also cease to exist in a discontinued policy. In any case, it is always advisable to pay for the full tenure of the policy, as to avail of the full policy benefits and also ensure your fund value returns are optimal.
The views expressed are the expert's own. Send your queries to yourmoney@bsmail.in