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‘A will by policyholder prevails over nomination’

‘A will by policyholder prevails over nomination’
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First Published: Mon, Apr 02 2007. 12 15 AM IST
Updated: Mon, Apr 02 2007. 12 15 AM IST
The insurance business in India isn’t just growing but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a weekly Q&A on insurance, every Monday.
What is a group pension scheme? Do life insurance companies offer such a scheme?
A group pension scheme is a product which an employer sets up for the benefit of his employees. All staff can become members of the same scheme.
Most life insurance companies offer group superannuation products. A well-structured group superannuation plan helps to create an irrevocable fund during the working lifetime of the employees for their pension benefits after retirement.
The employer can make a contribution of up to 15% of basic salary of the employee towards this fund. The employee can also make voluntary contributions into the superannuation fund. Now, investments upto Rs1 lakh per annum in group superannuation schemes by employers for each employee is exempt from the Fringe Benefit Tax.
What is term insurance?
Term assurance or insurance offers pure protection without any investment element.
As such, it is one of the simplest forms of life insurance. No investment element means there are no returns like money-back after a certain period.
A person can buy term insurance that covers him till he reaches a certain age, which is usually 60-65 years. Term assurance policies expire at the end of the term.
If one dies before the term ends, his beneficiaries will get the sum assured. If he is still alive at the end of the term, the policy expires and there is no payment.
Essentially, term assurance provides a low-cost way for a policyholder to provide for his or her dependants should he/she die during the period (the policy term) covered by the insurance contract.
What is the procedure for nomination and cancellation of insurance policies?
The nomination may be made at the time you apply for a policy or at any time before the policy matures for payment.
However, in case you wish to nominate a minor, you can appoint any person to receive the money secured by the policy for the benefit of the minor nominee.
Any such nomination may, at any time before the policy matures for payment be cancelled or changed by appointing a different person as nominee.
A will by the policyholder, showing intention to cancel the nomination, prevails over nomination.
Any subsequent nomination, change or cancellation thereof is required to be communicated and registered with the insurer.
Further, a transfer or assignment of the policy automatically cancels a nomination.
What kind of tax benefits can I get if I buy an insurance policy?
Life insurance plans get tax benefits under Section 80C and Section 10 (10D) of the IT Act. The benefits are the same in traditional policies or ULIPs (unit-linked insurance plans)
Readers are welcome to write in with their queries to ­askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.
(This week’s expert is Bert Paterson, managing director, Aviva India)
Additionally, knowledge of a fund’s history and track record can help investors make an informed decision.
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First Published: Mon, Apr 02 2007. 12 15 AM IST
More Topics: Money Matters | Personal Finance |