Insurance Uncovered

The following are the frequently asked questions on life insurance basics, compiled from IRDAI’s website:

What should I look for before I decide to buy a life policy?

You must check if the policy offers guarantee of return, understand the lock-in period requirements, check the details of premium to be paid, implications of premium default, terms and conditions for revival and terms and charges deducted, if any.

What are special medical reports required to be submitted in life insurance?

Depending on the age of entry, age at maturity, sum assured and family and personal history of the proposer, medical test requirements may vary with risk. For instance, if the proposer is overweight, reports such as electro cardiogram, glucose tolerance test, and so on, may be required, while for underweight proposers, X-ray of the chest and lungs, with reports, may be required.

What is meant by paid-up value in conventional life insurance policy?

After payment of premium for a defined period or beyond and subsequent premiums are unpaid, the sum assured is reduced in proportionate to the extent of premiums paid. For instance, if sum assured is ₹1 lakh and the total number of premiums payable (yearly) is 20 years, and default occurs after 10 yearly premiums are paid, the policy acquires the paid-up value of ₹50,000. The paid-up value is the number of term premiums paid divided by the number of term premiums payable, multiplied by sum assured. (10/20 x 100,000 = 50000). This means that the policy is effective as before except that from the date the 11th premium was due, the sum assured is ₹50,000 instead of the original ₹1 lakh.

What are the requirements in case of a maturity claim?

Usually, the insurance company will send intimation attaching the discharge voucher to the policy holder at least two to three months in advance of the maturity date of the policy, intimating the claim amount payable. The policy bond and the discharge voucher duly signed and witnessed are to be returned to the insurance company immediately so that the insurance company will be able to make payment. If the policy is assigned in favour of any other person, the claim amount will be paid only to the assignee who will give the discharge.

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