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Product crack | Whole-life term plan

Product crack | Whole-life term plan
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First Published: Tue, Jul 19 2011. 10 45 PM IST
Updated: Tue, Jul 19 2011. 10 45 PM IST
Name of the product
IDBI Federal Life Insurance Co. Ltd’s Termsurance Seniors Insurance Plan.
What is it?
This is a whole-life term plan that insures individuals between the age of 50 years and 85 years for their lifetime.
What do you get?
If the policyholder dies within two years of buying this policy, the insurer will not pay the sum assured, but only 125% of the premiums paid. For instance, for a sum assured of Rs 5 lakh the premium that a 50-year-old needs to pay is Rs 18,195 per annum. If the person dies in the second year after paying two annual premiums of Rs 36,390, the death benefit given to his beneficiary would be Rs 45,488. However, after two years, the entire sum assured is paid.
There are no maturity benefits since it is a whole-life term policy and pays the death benefit only to the nominee. You need to pay premiums till you turn 90 years.
You can surrender the policy any time during the policy tenor but not before you have paid premiums for three years. The guaranteed surrender value is based on a formula but as a general rule the surrender value increases if you spend more years in the policy. In the above example, after three years, the surrender value would be around Rs 8,813 or 16% of the premiums paid. However, if you surrender after, say, 10 years the surrender value would come to Rs 41,250 or 23% of the premiums paid.
What’s special?
According to the company, this policy poses no problems as far as underwriting is concerned. Any individual between 50 and 85 years of age can get a cover without having to undergo any kind of medical tests or medical interrogation.
You don’t need to give any health-related information in the proposal form. This information is important for the insurer since it helps in assessing the risk the insurer is taking in insuring the policyholder. In this policy, the insurer has tried to contain this risk by charging higher premiums and limiting the life cover to a paltry Rs 5 lakh.
Mint money take
Usually, by the time you retire you would have no financial dependants and you would have discharged your major financial liabilities such as paying off a home loan. It is for this reason that we recommend that you take a life insurance cover up to 60 years of age. Through this plan,Rs 5 lakh for 10 years. Factoring in the surrender value of Rs 41,250 at the end of 10 years, his total cost would come to around Rs 1.4 lakh. Compare this with a term plan for 10 years for a 50-year-old. An online term plan charges Rs 3,200 for a sum assured of Rs 5 lakh. The individual would pay Rs 32,000 over 10 years in a term plan.
This plan is expensive and the cover is limited. Buy this plan only if your health conditions preclude the purchase of a term plan.
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First Published: Tue, Jul 19 2011. 10 45 PM IST