How does it affect the risk cover under a life insurance policy if one pays the premium during the grace period offered by the insurer?
Sundar Gupta asked:
Each and every life insurance policy states the date on which the renewal premium is payable by the insured. The policies also provide a grace period for the payment of the premium. The grace period is one month for policies having yearly, half-yearly or quarterly premium payment terms. However, it is 15 days if the premium is paid on a monthly basis.
During the grace period the policy remains in full force, even if the due premium is not paid. Also, there is no additional interest on the premiums paid during the grace period. In case of the death of the insured during the grace period, the claim is payable in full subject, however, to the deduction of the unpaid premium amount.
Is partial withdrawal taxable for unit-linked plans (Ulips)?
Prasant Shaw, email
The question of taxability against partial withdrawal for Ulips arises only if the policyholder claims deduction at the time of contribution to the Ulip scheme. Taxability of the amount withdrawn from an Ulip corpus depends on the policy year. If the withdrawal takes place before the five years of the policy, the amount withdrawn becomes taxable. However, if the policy has run for more than five years, then the withdrawal is not taxable.
I could not pay the premiums under my life insurance policy for the last one year due to some personal problems. Now, I want to continue with the policy. What shall I do to resume premium payment and continue with the policy?
Vikram Verma, email
You have not mentioned the type of policy you hold. We assume that it is an endowment plan. In case of an endowment plan, most of them lapse if the premiums are not paid for more than six months. In such circumstances, you should approach the policy issuing office of the insurer and complete the formalities required for the revival of the policy. Depending on your health conditions and your age, you may have to undergo some medical tests before the insurer revives the policy.
I have taken a personal loan from a public sector bank. Can I keep my life insurance policy as security against the loan? What is the procedure?
Manju Sridhar, email
Life insurance policies are accepted as collateral security by most financial institutions. Therefore, you can certainly offer your life insurance policy as security for your personal loan. However, for this facility you will have to assign the policy in the favour of the lending institution. You will also have to approach the policy issuing office of the insurer and complete the paperwork related to the assignment of the policy.
My ex-husband has a insurance policy under which he made me the beneficiary. It’s almost a year now that we have separated. Can I still remain the nominee to the policy?
Reenu Singh, email
You have mentioned that the owner of the life policy is your ex-husband. So, it will be his sole discretion to appoint anyone as a nominee under the policy. A nominee need not be a relative. Therefore, even after the separation you can remain a nominee under the policy.
However, you must remember that a nominee is only meant to give a valid discharge under a policy as far as the insurer is concerned. A nominee receives the proceeds on behalf of the legal heirs of the insured. Information regarding nomination is not made public by any company unless it has been authorised by the policyholder.
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