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Photo: iStock

Refunds from life insurance plans depend on policy type and tenure

The refund would depend on the type of policy and the policy tenure, which is remaining. Claiming a refund during the policy tenure is called surrendering the plan

I have a few life insurance policies for which I paid premiums for five years and some for six years. After that, I could not pay the premiums. If I file for a refund, will I get the full amount deposited or there will be any deduction?

—Chander Mohan

The refund would depend on the type of policy and the policy tenure, which is remaining. Claiming a refund during the policy tenure is called surrendering the plan.

In case of a unit-linked insurance plan, you should be able to claim the current value of the unit, without any deductions. In case of traditional endowment plans, the surrender charges are relatively higher. These charges decrease with time. The method of calculating surrender value is specified in the policy schedule. Since you have paid premiums for over five years, surrender value should be relatively higher. If you have a term insurance plan, there is no surrender value, and you would not get any refund from the policy.

My husband, five-year-old child and I have a family floater plan of 5 lakh. Given the threat of covid-19, will that be enough to cover us all? Also, what happens if we make a covid-19 claim on this policy?

—Nikhila Agarwal

A floater plan of 5 lakh might prove to be insufficient if all of you are hospitalized in a private hospital. Hospitalization for covid-19 can cost anywhere between 10,000 and 40,000 per person per day, and if you are hospitalized for around 8-10 days, the costs would be considerably higher. The existing health insurance coverage, therefore, might fall short in covering your medical costs. Although some states are now fixing hospital rates, it would be prudent to opt for an additional sum insured to enhance the coverage that you have.

This can be done either by increasing the sum insured in your existing policy on renewal or by opting for another covid-19-specific health plan. You can also opt for a top-up plan, which would supplement coverage.

A covid-19 claim would be admissible in your present policy if you are tested positive and are hospitalized at a recognized medical facility. The hospitalization costs and treatment costs associated with covid-19 would be covered under your existing health insurance policy. However, if you are quarantined at your home or if you test negative, the claim would not be admissible. Also, in some cases, the cost of personal protection equipments (PPEs) is not covered.

Abhishek Bondia is principal officer and managing director, SecureNow.in. Queries at mintmoney@livemint.com

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