Business Standard / Mumbai August 19, 2010, 0:32 IST
I have an ongoing unit-linked insurance plan (Ulip). I want to enhance my cover. My insurance company does offer additional life cover as a rider. However, a term plan from another company for the same sum insured works out to be slightly cheaper. Which one should I opt for?
You seem to be in a dilemma in choosing between enhancing life cover in your existing Ulip and a term plan from another insurer. A rule of thumb, in such cases, is to focus on your financial objectives and then consider the price.
Both Ulips and term plans have different objectives. Ulips are the best option if you are considering a long term savings instrument that also offers life insurance protection. The advantage, in this case, is that the charges are lower in the subsequent years compared with the first year of the policy. This results in higher allocation towards the funds, leading to maximum investment.
So, if your existing life insurance plan offers an increase in your base sum assured and/or an additional cover as a rider, this option should be preferred, as it is ideally the most cost efficient. However, the insurer may ask for additional information or underwriting while increasing the cover. You should consider a term plan if your objective is to have higher cover for a certain period.
I am a 38-year-old architect. Recently, I started my own business. I have ten people working under me right now, including administrative staff, draftsmen and junior architects. I want to cover my entire staff under a group life insurance policy. Do life insurers offer group life plans? If yes, what are the pre-requisites under such policies, like minimum number of people to be insured and so on?
Yes, life insurers do offer group life plans that provide coverage to employees. However, in order to avail a group insurance product, there should be at least 50 members in any organisation. Alternatively, you can buy individual life insurance plans under the employer-employee scheme, wherein the employer is the proposer who takes life insurance on behalf of the employees.
Once the life insurance policy is issued, the employer assigns the policy to the employee and the premiums are paid by the employer. The only difference, in this case, is that certain customised group insurance products cannot be availed by such a small group.
What is a with-profit policy? I read such policies are entitled to bonus at the time of claim settlement or maturity. How much is this bonus on an average? How is it calculated?
A with-profit policy participates in the profit of a life insurance company. The profit is given to the policyholder in the form of various types of bonus. The most commonly available bonus is the reversionary bonus. Reversionary bonus is declared every year, but is available to the policyholder only at the time of maturity of the term or surrender of the policy or on death.
The calculation of bonuses depends on various actuarial valuations like underlying assets, level of bonuses declared previously and other actuarial assumptions.
Two years back, I had purchased two Ulips. Will the recent regulatory changes hiking the lock-in from three years to five years be applicable for me. Can I surrender the policy?
The changes proposed will be effective from September 1. You can surrender your plan after completion of three years, according to the existing terms and conditions. You may consider partial withdrawal rather than surrender of the policy.
The writer is the country manager of Allianz and MD & CEO, Bajaj Allianz Life Insurance. Send your queries to yourmoney@bsmail.in
From Business Standard published on August 19, 2010, 0:32 IST
