Money matters

Money matters

Can I change my life insurance policy nomination? If so, what is the procedure?

—Aniruddh Sharma

Yes, you can change the nomination at any time after the issuance of the life insurance policy by sending a request to your insurance company. For this, you will be required to submit the “change in nomination" form duly filled, signed and witnessed. When you make a nomination, you continue to be the owner of the policy and the nominee does not have any right under the policy as long as you are alive. The policyholder can change the nomination any number of times. Moreover, the nominee only has the right to give a valid discharge to the policy in the event of death of the policyholder, and the policy proceeds are divided among the legal heirs according to the will or other documents of inheritance made by the policyholder. Generally, insurers allow only close family members to be named as nominees.

My daughter has just turned two. I want to save for her college studies, about 13-14 years later. Please suggest a good children’s plan.

—Usha Das

There are two kinds of childcare insurance policies: endowment type and unit-linked insurance plans (Ulips). Depending on your requirement, you can choose between the two. Under endowment plans, annual premiums are invested in different funds that are usually not declared. The repayments are made at crucial stages, from the age of 18 to 21 every year, with bonuses. The life of the parent as well as the child is insured. In the event of the earning parent’s death, the policy continues while future premiums are waived and payments are made on maturity in addition to the payment of the sum assured. In case anything happens to the child, the premiums paid are refunded. There is no provision for surrender of such policies. In unit-linked childcare policies, annual premiums are invested in different market-linked funds, as offered by the company. The policy’s value is in units and its NAV is declared daily. The policy can be surrendered after the lock-in period, which is usually three years. The sum assured is paid on maturity, which is when the child turns 18 or 21, as decided. Bonuses are paid every year as declared by the insurer after the lock-in period. In case the policy is withdrawn after the lock-in period, the surrender value is paid. In case of death of the parent, premiums paid are refunded along with interest, unless pay or benefit riders are opted for, wherein the policy continues and future premiums are waived.

I invested in MetLife’s Met Smart Plus in 2007. The sum assured is Rs2.4 lakh for an annual premium of Rs12,000. I have already paid three premiums and now want to make it a paid-up policy by not paying any more premiums. My plan is to invest in an LIC endowment policy with a sum assured of Rs2 lakh, at an annual premium of Rs7,608. I am also thinking of investing in another limited payment endowment plan. This one will have a sum assured of Rs2 lakh at an annual premium of Rs8,462. I am 33 years old. Is my plan correct?

—Parantap Dasgupta

First, you must understand your need for insurance and the reasons for switching plans. In unit-linked as well as endowment plans, the charges are high in the initial years and the policy gives good returns only if it is continued for a longer duration. If you are taking two policies to increase your sum assured value, take a term insurance plan that will give you higher sum assured at a lower premium compared with the others. The premium of a term insurance plan is lowest as it does not offer any return. At your age, you can get a sum assured of Rs10 lakh for an annual premium of about Rs3,800.

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