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Life insurance is an income protection for the dependents of the life assured.

Q. Please tell me about the best health insurance policy for a family of 4 with a monthly income of ₹35,000?

MUHAMMAD ASIF RAO

A. You haven’t said how old your family members are, so let us go by the assumption of a couple in the late 30s and two children in the 10 to 12 years’ range. A basic hospitalisation policy with a family floater sum insured of at least ₹5 lakh would be good to begin with. This would cost between ₹10,000 and ₹12,000 a year.

The premium amount could make one hesitate, but a floater sum insured is cost-effective and the coverage is value-for-money as you are protected against harsh hospital expenses.

Having said that, if you have the option of an employer medical insurance scheme that should be your first option. You can cover your spouse and children and, depending on the scheme, your parents as well.

As to what cover to choose, check a policy called Arogya Sanjeevani. It is a standardised policy that each general insurance company or health insurance company ought to offer. Every insurer’s Arogya Sanjeevani policy will have the exact same policy benefits but with different premium rates. You can do an Internet search and see what this policy premium works out to for your family and choose the best option.

Q. I have been married for three years. My wife is pursuing her Ph.D. and doesn’t have any regular income. I am looking for a life insurance plan for her as I already have a term policy in my name. No insurer would provide any term plan as she did not have regular income. Please advise.

SANTHOSH GEORGE

A. Life insurance is an income protection for the dependents of the life assured. From that point of view, insurance companies base the amount of insurance they will offer on the earning capacity of the prospective life assured. An income is also the basis of verifying whether the prospect can afford regular premium payment to keep the policy alive. These would be the reasons why you have found it difficult to get your wife a term insurance policy.

This is not to say that it is not possible for her to buy life insurance. Please talk more in detail with the company that gave you your term insurance policy and set out the details of your family finances and future career prospects after she finishes her doctoral studies. Past employment history, if any, would also help establish her prospects in the employment market. Investments, earnings from investment and property belonging to your wife will give them comfort on premium paying capacity.

One way to make a breakthrough may be to try to buy a small policy. You can always add further sum assured by way of additional policies later.

Q. I had taken an annuity policy with a premium-paying period of 10 years. I discontinued premium payment in early 2020, having paid ₹10 lakh in two years.

As per the policy terms and conditions the policyholder may surrender his policy after a period of five years from the commencement of the policy and the fund value under the base policy (including top-ups) less applicable discontinuance charges, if any, will be paid to the policyholder according to the following options:

1. To commute to the extent allowed under Income Tax Act (0 to 33.33%) and the balance must be applied to purchase immediate annuity from the same insurer which shall be guaranteed for life, at the prevailing annuity rate or

2. To utilise the surrender value either to purchase a single premium deferred pension product of the same type from the company, if any. I request you to explain how to assess these options are worked out.

C. SATISH

A. Any annuity plan requires you to use the bulk of the fund value/ maturity value on the vesting date or on surrender to buy an annuity policy from the same life insurance company. You have the option of taking up to 33.33% of the fund value as a commutation and this will be tax-free. The remainder of the fund value has to be used to buy an annuity.

Here, you have two options. An immediate annuity, which means your pension amount from this policy will start immediately and be paid at the frequency you opt for through the rest of your life. You may have a few options to consider on that such as return of purchase price and so on.

The other is a deferred annuity, which means you make the purchase now and opt for an annuity to start on a date of your choosing, a.k.a. the vesting date. They would have options on how late that vesting date can be depending on your age.

Deferred annuity would give you a better annuity amount than an immediate annuity simply due to the future value of present money.

As for information from the company, please ask them in writing for clarifications and they are bound to give you the information you require. You can also read your policy bond and read up information about this specific policy on the company’s website. Since your policy can be surrendered by 2023, you have time to do the research.

(The writer is a business journalist specialising in insurance & corporate history)

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