I have type II diabetes and want to buy life insurance to protect my dependants. What are my options and what would be the premium? My family consists of my wife (40 years old) and son (10 years old).
—Satish Bhowmick
Insurers underwrite life insurance proposals for diabetes patients conservatively which means they are likely to load the premium or decline the insurance. Many insurers would refuse to issue cover if the person is insulin-dependent. You could apply for a lower sum assured and shorter term. Since the risk exposure will be relatively small, insurers may be open to give a cover. Once a policy is issued, you can enhance coverage by buying additional policies. It becomes difficult to buy insurance if your proposal has been declined in the past. So, request the insurer to pre-underwrite based on your medical reports before making a formal application. A term plan for a sum assured of Rs50 lakh for a 5-year term would cost around Rs6,000.
I bought two Ulips in 2008. I now want to surrender them. Will I incur a lot of losses?
—Sanjukta Das
For policies issued under the new regulations effective October 2010, surrender charges after five years are nil. However, your policy was issued before, so that may not necessarily be true. So you should check your policy schedule for the exact surrender charges. Generally, even in the previous regime, surrender charges in Ulips would be low, if at all, after 10 years.
When I get the proceeds from a Ulip, is tax already deducted on it, or do I have to include it in my tax return?
—Renee Mohan
Life insurance maturity proceeds are tax-free under Section 10(10)D, if you meet the laid down criteria. One of the important criteria is that the sum assured should be 10 times of the annual premium paid. In case your policy does not qualify under tax exemption, then the insurer will deduct tax at source (TDS) on the proceeds. You will still have to include the proceeds in your tax return and pay taxes as per your overall tax liability.
I bought a term plan about 3 years ago. That time the sum assured was 10 times my salary then. How can I increase my cover in accordance with my higher salary?
—Hritesh Saluja
Typical term plans do not allow sum assured revisions in existing policy. You would have to buy a new policy to fill the gap. You have two options. Either you can buy a new policy for the incremental sum assured or buy a fresh policy with the revised sum assured and then surrender the previous insurance. Do make sure that you do not surrender your previous insurance unless the new one is issued. Term life rates increase with age. So you may find the first option more cost-effective.
Abhishek Bondia is principal officer and managing director, SecureNow.in