Life Insurance: Deepak Sood
I am 28 and bought a pure protection plan a year ago. Recently, I have started smoking occasionally. Should I inform my insurer? Is there a possibility of the insurer discontinuing my policy?
The policy terms are based on the health and overall profile of the life assured (that is, you) as on the date of the proposal acceptance by the insurer. Recent habit(s), though injurious to health, need not be disclosed if the policy is in force. However, if the policy lapses on account of non-payment of future premiums, then at the time of revival, any such change in lifestyle (smoking, drinking, avocation) and changes in physical health conditions (sickness, injuries, accidents), including major sickness or impairment requiring hospitalisation/surgery, contracted at any time after the policy was issued will need to be disclosed. At revival, new terms may be offered by the insurer.
What is the difference between death benefit and sum assured?
Sum assured in life insurance contracts generally refers to benefits payable under different contingencies such as death, disability, survival and so on, covered under the contract. It is also used to charge premiums and to work out bonuses, if any payable under the contract.
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Death benefit is the amount payable on death of the life assured. This might be the same or different from the sum assured. For instance, in a term assurance plan, death benefit is generally equal to the sum assured, and under a with-profit traditional endowment plan will normally be the sum assured plus accrued bonuses.
Under some endowment or term assurance plans, the death benefit might increase, say, equal to the sum assured if death occurs within five years, 150 per cent of the sum assured if death occurs between five and 10 years, and 200 per cent of the sum assured if death occurs thereafter.
What is a return of premium (ROP) plan? Are these similar to term or investment plans?
Life insurers offer plans where benefits are payable on various contingencies such as death, disability, critical illness and so on. The plan could also provide benefit on survival within the term, in which case it is termed a savings/investment plan. Further, the weight-age of benefits payable on death/disability might be different from those payable on survival under different plans. For example, a pure-term plan provides benefit only on death and nothing on survival (that is, nil weightage to savings), whereas an endowment plan might provide the same benefit on death and survival (that is, same weightage to savings).
ROP plans fall between these two. They are mainly term products with a minor survival benefit, which is typically equal to the sum of premiums paid during the policy term. Thus, the family of those who die get the sum assured and others who survive till the end of the term get their premiums back as survival benefit.
The writer is the MD & CEO of Future Generali Life Insurance. Views expressed are his own