I receive lot of queries on personal finance issues.Some of these queries pertains to a specific situation of the individual while some are on the products, awareness of which is beneficial to all of us.
I will be sharing most of these queries on my blog for the benefit of the readers.Given below are queries related to life insurance which were received by me through a publication.
You can post comments and further queries which will be highly appreciated.
I will be sharing most of these queries on my blog for the benefit of the readers.Given below are queries related to life insurance which were received by me through a publication.
You can post comments and further queries which will be highly appreciated.
I have taken 4 lic polices, is it compulsory that at the time of taken new policy , previous policy details are mandatory and if a person does not mention the previous polices details so what will be the future effect.
In life insurance Principle of utmost good faith is the most important doctrines underlying the law of insurance. Here, the term good faith signifies good intention and due care & caution. What this means is that either of the party has to ensure that all material facts are disclosed to the other party so that they can reasonably enquire about the same.
Whenever an insurance company evaluates eligibility, it takes into consideration all your existing insurances. For e.g if your income is Rs 4 lakh and the company mandate to give insurance coverage upto 20 times the annual income, then you are eligible for Rs 80 lakhs of death coverage. Now, if you have existing insurance coverage of Rs 20 lakh then the company will give only up to Rs 60 lakh. Here, if you have not disclosed this information and the company gives you Rs 80 lakh policy, then you are actually in profit of Rs 20 lakh as per insurance definition which is not allowed. Hence, during claim the company may reject it on basis of suppression of material facts.
In one such case the death claim was rejected due to breach of this act-
“Repudiation of Death Claim: The Assured had not mentioned the details of previous policies held by him while proposing for insurance. Had he disclosed the facts of his previous policy, the Respondents would have called for further medical reports to properly assess the risk. The Assured thus committed a breach of utmost good faith which is the cornerstone for all insurance contracts. Therefore the policy contract was vitiated. As such, the decision of the Respondent to repudiate the Claim was upheld.”
Thus, it becomes necessary to disclose all your previous insurance details to your existing Insurer to avoid rejection of claim.
I am investing in LIC ATM plan. Agent has promised me a assured return after 15 years. I have already paid two installments…. Should I continue this policy or exit. I did not purchase it for protection but for investment in debt only. Please suugest what should i do?
Don’t go by the name. It is called ATM (Any Time Money ) Plan, the policy is Jeevan Saral.
But why ATM? Because in the policy you can surrender without any penalty after 5 years of premium have been paid.
What is the policy– LIC Jeevan Saral is actually an endowment policy with some features added to make it attractive. However, if you look detail soft the product them most of the features are on exiting the policy or on death. Here is what the policy says:
“In this plan, the premium amount is decided by the policyholder and he gets 250 times the monthly premium as Sum Assured. If the Life Insured survives the entire term, then he would receive Maturity Sum Assured + Loyalty Additions. The Maturity Sum Assured depends on different entry ages and policy term and is specified at the beginning of the policy.Now, if the Life Insured dies within the policy tenure then his nominee would receive the Sum Assured + Return of premiums excluding extra/rider premium and first year premium + Loyalty Addition, if any.Thus, the Death Benefit would be the same irrespective of age of entry and policy term since it depends only on chosen premium amount but the Maturity Benefit would differ according to varied age of entry and policy term. “
I will not go on deep analysis of the product itself but there should be basic understanding of traditional plans.
Endowment plans including Jeevan Saral are debt products which invest majorly into debt securities like G-Sec and bond. Some part of the premium you pay goes towards expenses like Mortality charges, marketing, sales and admin charges and the rest towards investment in underline securities. It’s very difficult for any insurance company to fetch higher returns from these products when the underline security is not able to generate exceptional returns and expenses in initial years are high. Because of this the endowment products generate 5-7% CAGR. Consider inflation, the real returns is almost negligible or you may lose money in some cases.
If you are investing only for debt exposure PPF yield you much higher returns, that too tax free. Even debt mutual funds in such a long period can generate good post tax returns.
Hence, research various options in detail and consider inflation for knowing the real returns you will earn on your investments.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.