Q. My wife took two life insurance policies with her being the policy owner and my daughter, the life assured. My wife recently passed away and when I requested them for ownership change, they refused, citing my age. My daughter already has a few policies and is not interested in continuing with more commitments. Under the circumstances kindly advise me how to take it forward.
V.BALASUBRAMANIAN
A. Many pieces of information are missing from your question that prevents a suitable response or solution. So, let me answer based on some assumptions.
If your daughter was a minor when the policy was taken then there would have been an assignee who would now become the policy owner and can pay the premiums.
If that is not so, ask the insurance company how you can keep the policy valid by paying premiums until maturity. If paying premium is not going to be an option, you have to ask the company about making the policy paid up or if there is a way to surrender it. In the former option, the policy will continue with a lower sum assured and in the latter option, it will cease and a truncated surrender value will be paid to the nominee. In case you are referring to nominee as policy owner, the proceeds will go to the legal heir of your wife and your insurance company will help you go through the process for it.
Q. I took two policies, one in my in my son’s name and the other, in my daughter’s name for 20 years each and the premium comes to about ₹19,800 per month. My son is 28 and daughter, 23. Is this a prudent investment?
SRIDHAR M.K.
A. The objective of an investment determines its suitability and utility and should form the basis of the choice. The policy you mention is a life insurance plus savings plus money-back policy with a limited premium paying term. To answer your own question, please validate the returns of the policies and their life coverage with your children’s ages and life stages in mind.
The benefits of the policy are a cash flow (in the form of money-back) that starts after the premium-paying term is over and continues till maturity, the maturity benefit itself which is equal to the sum assured plus loyalty bonuses and, of course, life cover through the policy period. The tax offset for premium and tax-free nature of all payments under the policy are also benefits.
If these are what you wanted, so far so good. Please research if you could have got a better return by combining a term policy, a recurring deposit on a cumulative basis for the same period as the premium paying term and a fixed deposit for that maturity amount for a period equivalent to the policy term less premium paying term. Adjust both principal and returns for the tax benefits available in the life insurance investment. Adjust also for projected loyalty bonuses on the policy. The life insurance logic per se of this investment may be worth a relook. At the core of it, a life insurance policy for somebody in their twenties seems irrelevant until they have dependents, unless of course latching on to a lower premium rate is the advantage. Also, a policy that covers them only up to their forties seems inadequate in terms of time.
Q. My wife and I are senior citizens. I took medical insurance for both of us. Kindly clarify the following:
1. My son’s company covers medical insurance for parents also. Can we claim at a time from both the companies?
2. Is it wise to discontinue my policies?
3. My insurance company raises premium annually though I am not claiming, why?
4. I learn that premium for the senior citizens will not change, why?
A. KRIPANIDHI
A. You can claim from any or all of multiple hospitalisation policies, but the payments will be mutually exclusive as they will be against bills and will add up, at the most, to your actual expenses. Having said that, opt for claiming under more than one policy only if your claim exceeds the sum insured limit, or you will lose the benefits accumulated for making no claims.
It would be prudent to continue with your policies for a few good reasons. One is that your son may change his job and the terms of corporate health cover at the new place may not be the same. There may be a gap in coverage. He may leave his employment and become an entrepreneur or student, in which case, he himself would be looking at buying independent hospitalisation insurance.
The second reason to continue is that you may or may not get coverage later if you want it because of your age. If you do, your sum insured will be restricted to begin with and your waiting periods for pre-existing conditions may start all over again.
As for the question about increasing premium rates for health insurance, insurance pricing is based on collective coverage matching group risk profiles. Each year, many people pay premium to foot the medical expenses claims of a few plus the expenses of the insurance company offering the scheme.
When costs go up, the insurance company reworks the premium rates for everybody so as to sustain the insurance cover and be in a position to pay higher claims in future.
In addition, premium rates go up by age slabs reflecting the higher chance of illness, hospitalisation and claims. Or else, much of the premium being paid by the 30-year-olds would go towards the relatively higher claims of the senior citizens, whereas, with an age-related premium, one is paying a rate that is more risk appropriate for one’s age group. Premium rates for senior citizens will keep changing, just like it will for everybody else.
(The writer is a business journalist specialising in insurance & corporate history)
