Survival period in a critical illness rider is usually 90 days

A claim is paid only if the person survives for this period


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When is the payment made if one has a critical illness rider with a life insurance policy?

—Biju Jose

The benefit of a critical illness rider is paid when the insured is diagnosed with one of the specified illnesses and lives through the survival period. The critical illnesses are defined in the policy contract and definitions are standardised by the insurance regulator. A typical survival period in the critical illness rider is 90 days. A claim is paid only if the person survives for this period. If one dies during this period, then just the death benefit is paid. The payable benefit in critical illness is not linked to the policy maturity date.

I am getting married in a few months. My to-be wife does not have a term plan but will get one after the marriage. Should I wait to buy a combined cover or buy an individual plan now?

—Nandan Kishore

I would recommend that you buy your term cover sooner rather than later. There are no substantial benefits in joint-life plans that are on offer. Such plans are meant to offer a discount because two lives are getting insured together. But practically, it is better to have two stand-alone plans. The price of a stand-alone plan works out to be lower because you can pick the most cost-effective plans. Also, if you want to discontinue or alter coverage, it is easier to do.

Is there any tax benefit on premiums paid? After the maturity of my policies, will the proceeds be taxed?

—Malini Sharma

As per prevailing tax laws, for insurances issued on or after 1 April 2012, the premium paid to a life insurance plan is eligible for deduction under section 80C of the income-tax Act up to a sum of Rs.1.5 lakh. Only premiums up to 10% of the sum assured are eligible for the deduction. Maturity proceeds of these policies are also exempt from income tax under section 10(10)D, subject to the condition that the premium be 10% or less of the sum assured. In some specific cases, if a person has a disability or suffers from disease or ailments, as specified in the income-tax Act, the deduction is enhanced to 15% of the sum assured. Also, death benefit is tax-free.

Is it advisable to buy a child plan?

—Faisal G.

A child plan is a savings cum protection plan taken for the benefit of the child. The concept of a child plan is to have regular forced savings for a pre-defined financial goal for the child’s benefit. In case of death of the parent, it ensures that the financial goal for the child is still met without the need to pay future premiums.

Traditional endowment products as well as unit-linked insurance plans are offered as child plans. Make sure that it is the life of the parent and not the child that is insured. Also, waiver of premium is important because then the insurance continues even if the parent insured dies.

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