5 Nagging Insurance Queries Answered

By | July 14, 2015


Life insurance

Amitabh Bachchan immortalized the ‘Phone-a-friend’ option in his blockbuster television show Kaun Banega Crorepati. To participants groping for answers, this usually came as a much-needed lifeline.

What wouldn’t you give to get help similarly with the myriad questions about insurance confounding you? Well, we don’t have a Phone-a-friend option but we sure do have a Read-a-blog-post option.

So, read on to know more about five of the most commonly sought answers by insurance buyers.

What happens if my policy lapses?

An insurance policy is said to be lapsed if you fail to pay the scheduled premiums beyond the grace period given (ie, 30 days from the premium date). When a policy lapses, all the terms and conditions of the contract become null and void and your dependents will not get the benefit. But, this doesn’t mean that the policy stands cancelled.

A lapsed policy can be revived within 5 years of the date of the last premium due date. But, to bring back the policy into force, all the pending premium amounts and the accrued penal interests have to be cleared. If it is been more than 6 months since the policy lapsed, the insurer might ask you to get medical check-up before reinstating the policy.

What if I happen to discontinue the premiums?

If due to some reasons, the payment of premiums is discontinued, then the policy lapses after completion of the grace period. Now, a person has two options: either get the policy revived or surrender it.

If it is decided to revive it, it can be done after paying all the pending premium and additional charges, provided you do so within 5 years.

Now, if it is planned to surrender the policy, if the policy had been in force for less than 3 years, then no amount will be paid by the insurance company. But, if the premiums for the policy were paid for 3 or more than 3 years, then you may receive some amount on surrendering the policy depending on factors like policy term, number of years for which the premium had been paid, accrued bonuses, etc.

What is the guaranteed return on maturity of my insurance policy? 

The guaranteed amount on maturity depends on the plan you choose. For a plain term insurance, there is no maturity amount to be paid out, unless the policy holder expires during the tenure. But, for other types of policies like endowment policy or money back policy, the company pays out an amount equal to the Sum Assured (SA) and accrued bonuses as final maturity amount.

In money back plans, the bonuses are paid out to customers on completing significant periods in the policy like 5, 10, 15 years. In case of Unit Linked Plans, the maturity amount depends upon the fund performance or guaranteed Sum Assured, whichever is higher at the time of policy maturity.

What are the common charges on insurance?

There are a variety of charges that are deducted from your insurance premiums. The major ones are:

Mortality charge: This is a small charge collected from the premium, for providing the death benefit to the nominees of the policyholder.

Premium Allocation Charge: A specific percentage will be deducted upfront from the premium to pay for the cost of underwriting, policy issuance and for expenses like paying commissions to agents.

Fund Management Charges (FMC): It is basically levied on ULIP plans and is used for the management of the fund that is created by pooling up of all the premiums received. FMC varies from fund to fund and depends upon the underlying assets in the fund.

Policy administration charges: It is a nominal charge deducted from the fund at some regular intervals, to recover the expenses incurred by the insurer for servicing and maintaining the policy (against paper works, work force etc).

Can I discontinue my policy?

Policy holders can discontinue their policy at any time, if they wish. There are three ways in which it is done.

If the policy is discontinued during the free-lookup period (within 15 days of buying), then there will not be any charges for the same, and the premium will be fully refunded by the company.

If the policy is discontinued before completing 3 years (or 5 years in case of some policies) your money in the form of premiums paid to date is forfeited. The insurance company will pay nothing as per the terms and conditions.

But, if the policy is discontinued after 3 continuous years of premium payments (or 5 years as per the terms and conditions), then you are eligible to receive some amount as surrender value as applicable at that time.

Mr. Bachchan’s Phone-a-friend may or may not yield the desired response, but our Read-a-blog-post sure does.

To answers lock kiye jaye?

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

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