I have heard insurers are launching new, improved unit-linked insurance plans (Ulips), in terms of lower charges. I own two Ulips, one two years old and the other six. Do you suggest terminating these plans and buying new ones? Is there any advantage in staying invested in the older plans?
You need not terminate the current plans, unless there is a desperate need of liquidity. Continue paying the renewal premium regularly to ensure the continuity of the life cover. Also, monitor the fund performance periodically and use the switch option to manage the funds.
However, if you have chosen asset-allocation funds, you don’t need to worry. The fund managers will automatically manage these for you. You can take advantage of investment strategies, like “wheel of life”, which ensure optimisation, if available with your policy. It’s always better to continue with the existing cover than buying a new one.
The new Ulips launched after September 1 are more transparent. In case you have excess funds, and you are keenly considering investment-cum-protection instruments, you may consider taking advantage of the new Ulips.
What is the difference between a term plan and a return of premium (ROP) term plan? Is it beneficial to go for the latter, if I am looking for a pure life cover?
A term plan is a pure protection plan with death benefits only and no maturity benefits, while a term plan with ROP provides life cover where all the premiums paid are refunded as maturity benefit, if the life assured survives maturity.
If you are looking for pure life cover, you should buy a term plan rather than a term plan with ROP. However, the latter is ideal as a ‘forced-saving instrument’ for those with a higher disposable income, seeking a life cover to protect their family.
I got my electrocardiography (ECG) done before submitting the proposal form for a life insurance policy. I got it done before the date for medical check-up. The company wants me to go for another ECG, saying the test should have been done after the date of proposal. But ECG is valid for 12 months. Is the company right?
Life insurers follow their own underwriting norms and guidelines, and this varies from one insurer to another. If an ECG is done within six months, insurers do not insist on getting it done again.
But if there is something adverse reported, then most insurers insist on getting it done again, irrespective of the time that has elapsed. Also, it is observed that there is a great degree of variation in ECG reports.
I am 38 years old, married and earn Rs 4 lakh annually. I have two children, eight and four years old. Does it make sense to buy a critical illness or accident rider or health policy?
Critical illness or accident riders give additional benefits, and are the best when you already have a life insurance policy. However, these do not replace an indemnity-type health insurance policy, which covers hospitalisation expenses. So, I would suggest you opt for a health insurance policy before you buy any rider.
The writer is managing director and CEO of Bajaj Allianz Life Insurance. Send your queries to yourmoney@bsmail.in
