Qualifying for Life Insurance – Things to Know

  • December 30, 2017

Looking forward to avail a life insurance policy but don’t know if you are eligible for the same? Here are appropriate eligibility conditions and restriction for the same:

Eligibility Criteria for Basic Plan

The Age – The age at entry for individual is between 20 to 60 years (age nearest birthday). The age of the Life Assured at maturity should be 70 years maximum.

The Term – All of the terms of life insurance range between 10 and 25 years. The minimum term for single premium mode is five years.

The Minimum Sum Assured – INR 50,000 /-
The Maximum Sum Assured – No limit.

Policy sum assured will be only in multiples of INR 5,000 /- These are paid in the following modes:

– Yearly
– Half-yearly
– Quarterly
– Monthly

Premium Payment

Policy holders can pay premiums regularly during the paying term at the monthly, quarterly, yearly, or half-yearly mode (through ECS only). Policy holders can also pay these through salary deductions over the policy term. The company will also offer a grace period of at least one month wherein only less than 30 days are allowed for making quarterly, half-yearly, or yearly premiums. The policy holder can also get 15 days for monthly premiums.

Paid-up Value

Once the policy holder pays premium for two years, and subsequent premiums remain unpaid, the policy shall not be wholly void. It will subsist as a paid-up policy.

Under paid-up policy, the Sum Assured on Death shall be reduced to such a sum, referred to as ‘Death Paid-up Sum Assured’. It will bear the ratio similar to the Sum Assured on Death because the number of premiums paid will bear the total number of premiums payable such as Death Paid-up Sum Assured = Sum Assured on Death * (no. of premiums paid / no. of premiums payable during the premium paying term).

Death Paid-up Sum Assured along with along with vested simple reversionary bonuses, if any, is payable on death of the Life Assured during the policy term.

Any Sum Assured on Maturity under a paid-up policy will be reduced to ‘Maturity Paid-up Sum Assured’. It is important to remember that paid-up policy will not accrue any further bonuses. Also rider(s) will not acquire any paid-up value. Benefits of the rider will cease to apply, once the policy is in lapsed condition.

Surrender Value

Life insurance policy can surrendered once premiums for 2 years get paid. The Guaranteed Surrender value shall be a measurement of total premiums paid (net of service tax). This excludes additional premiums and premiums for rider(s). The percentage depend on the policy term as well as policy year in which the policy is surrendered.

Policy Loan

It is possible for a policy holder to avail loan under the policy. However, this is only possible once the policy has acquired a surrender value. This is subject to the terms and conditions specified specify by the company on a regular basis.

Taxes

The taxes applicable include Service Tax, if any. These are applicable as per the Tax laws and tax rate of tax from time to time. The policy holder is also required paying prevailing rates on premiums. This also includes extra premiums, if any. The tax amount will not be considered for the calculation of benefits payable under the life insurance plan.

The Cooling-off Period

The policy holder may return the policy to the company within 15 days from the date of receipt of the policy bond in the event when he/she is not satisfied with the “Terms and Conditions”. The policy holder should also state the reasons of return. The company will cancel the policy and return the amount of premium deposited. It will also deduct the equivalent risk premium (for basic plan and rider(s), if any).

Understanding Exclusions

Suicide

The policy will be considered void in case the life assured (regardless of being sane or insane) commits suicide at any point in time within 12 months from the date of initiation of risk. The company will not entertain any claim under this policy. Only 80 of the premiums paid excluding rider premiums (not term assurance rider), extra premium, and any taxes will be entertained if policy is in force.

When the Life Assured (regardless of being sane or insane) commits suicide within twelve months from revival date, an amount higher than 80 per cent of the premiums paid is payable till the date of death. This excludes all additional premiums, any taxes, extra premium and rider premiums (not term assurance rider) or the surrender value.

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