Is a ULIP better than a term plan?

Do you have questions regarding insruance? Outlook Money helps you with the answers.

Should I choose a ULIP over a term plan, as it offers higher chances of fund appreciation at a lower premium?

-- Ajit B. Munjal

You also need to find out the life coverage offered under ULIPs and term insurance policies. The coverage under a term insurance policy will be much more compared to that under a ULIP. The premium on a ULIP gives you life insurance and also serves as an investment.

If you segregate the premium into the insurance and investment parts, you will find that the sum insured in the case of a ULIP is very low. Therefore, if you want proper coverage of life risk, you should go for a term insurance policy. If the criterion is investment with a low insurance, you can go for a ULIP.

I am 23 years old. At what age should I buy a life insurance policy?

-- Rajesh Ahluwalia, email

Requirement of life insurance arises when you have financial dependents. Ideally, you should purchase a life cover when you are healthy because the premium is dependent on your age as well as the state of your health. Normally, insurance companies do not insist on any health certification up to the age of 35.

Therefore, it is advisable to go for life insurance cover prior to attaining the age of 35. You need to be more particular if you your family health history puts you in the 'risky' category. If it does, you may have to pay a higher premium. If you have financial dependents, you should go for life insurance immediately. If not, you can chose the time of buying a policy considering the above factors.

Once the agent of a life insurance company fills up the proposal form, is the company liable to issue the policy? What is the procedure for issuing life insurance policies? 

-- Rekha Tekriwal, email

The proposal form is filled by a prospective insured for the consideration of the insurance company. Once the prospective buyer of a life insurance policy fills up the proposal, the documents go to the underwriter of the insurance company for scrutiny and acceptance of risk.

The underwriter examines the proposal in the light of declarations made by the proposer under various heads like health condition, age, income, tenure of the policy and sum assured. Generally, within a specific age bracket, the proposer is not required to undergo any medical examination.

However, if the underwriter comes across a doubtful medical condition while scrutinising the proposal, he may ask the proposer to undergo specific medical tests before accepting the proposal. The underwriting which takes place after taking into account the results of the medical tests is generally known as medical underwriting.

Based on the medical reports, the underwriters decide whether to accept the proposal at normal rates, or load the premium, or deny the proposal itself.

As per the terms of agreement of a loan, I have to assign one of my high value policies in favour of a creditor. My wife is a nominee under that policy. What happens to the existing nominations in a policy in case it is assigned?

-- Bhagwati Bhatlekar, email

Existing nominations under a policy get automatically cancelled when it is assigned. However, If the assignment is made in favour of the insurer, for a loan granted against the security of the policy, the nominations don't get cancelled automatically. However, the right of the nominee to the extent of the assignee's interest in respect of the loan advanced does get affected. In other words, in the event of a claim the nominee will be paid the claim amount that remains after repaying the loan and interest.

As I am moving to a new city, I will get my car registered again. Do I have to re-insure as well?

-- Bikramjit Singh

A motor insurance policy once issued is valid within the geographic territory of India. The cover can even be extended to the neighbouring countries of Nepal and Bhutan. Therefore, your car policy issued at one city will continue to be operative elsewhere also.

However, on change of registration number, you have to get the same endorsed on your policy. For this you need to write a request letter to your insurers enclosing a copy of the old as well as the new registration certificates and your new address for communication. The insurers will send you an endorsement to this effect. Further, since there will be no change in the value at risk, they will issue the endorsement without any extra charge.

I have an Alsatian dog. Do I need to take a third-party insurance policy for the pet?

-- Dashrath Prasad, Jaisalmer

Although it is not compulsory, but it is certainly advisable to get your pet insured. Pet insurance is particularly important from the view of third-party liabilities that may arise. For example the dog might damage your neighbour's garden or bite somebody. In such cases, insurance helps to eliminate or at least reduce the financial burden on the owner.

Usually pet dog policies are offered for pure or crossbred pedigree dogs. At the time of insurance the age of the pet must be between two months and eight years. For underwriting purposes, you have to provide sufficient identification of the dog, which can be done either by tattooing, nose print, colour photograph (face or side) or some natural identification mark. The purchase price of the pet is considered as the sum insured under the policy.

Recently some insurers have started offering this cover as part of the their householder's policy.

Is a single-premium mediclaim available in India to give whole-life cover? If yes, then which insurance company provides it?

-- Harvinder Kaur, Agra

So far, no insurance company in India has come up with a long-term policy on health insurance. At present, health insurance in India is being marketed by general insurance companies under annual contracts, which need to be renewed every year.

Recently my car was hit by a lorry and suffered major damages. My auto insurance premium was due at that time. However, since I was hospitalised after the accident, I couldn't pay the premium on time. Can I still claim for the damages to my car?

-- Plabita Barua, Guwahati

A motorcar policy is issued for a specific period of time, usually for one year. The risk coverage under the policy starts at the time of payment of premium and ends at the midnight of the last day of the policy. There is no grace period in general insurance policies.

If your premium on the car policy was due at the time of meeting with an accident, it means that your car was not insured at that time. Under the circumstances, even if you renew the policy, the risk will commence from the current date after the pre-inspect of your car. Therefore, unfortunately, you claims will not be accepted.

We are a family of four. I am 55, my wife 52 and my sons 31 and 27, respectively. Please suggest a good family health policy.

-- Arvind Goel, Surat

You can go for a family mediclaim policy from any general insurance company. Further, it would be best if you procure the policy with a family floater, which means that if the need arises, the entire sum insured will be available for each member of the family.