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Sanjiv Shankaran

ONCE one has decided on a term assurance policy, a few other factors need to be considered.

Most of the companies covered in this article offer riders. The most popular riders are ones that pay a higher sum assured in the event a policyholder meeting with an accident, and one with an early payout in the event of the policyholder contracting a specified illness. Riders raise the cost of a policy because their charge is added to what one pays for the base term assurance policy.

It may be useful to take a close look at the riders on offer because their benefits may fit a felt need. Arguably, the most useful rider would be that on critical illness as it would provide the policyholder a financial cushion if he is affected by medical complications during the life of the policy.

After one has got past the rider hurdle, the next decision will have to be about the mode of premium payment: A one-time or an annual payment. This decision has assumed significance because the Government has indicated that it may gradually phase out tax rebates on insurance premiums. Therefore, it may not be prudent to depend on tax rebates when estimating the financial burden of an insurance policy. A one-time premium payment would solve that problem because subsequent tax policy changes would be irrelevant.

The accompanying tables give illustrative premiums charged by companies that offer the product. The key word is illustrative.

For instance, LIC may offer the lowest premium for a 30-year-old male (generally, companies charge women lower premiums because of a better mortality experience) taking a Rs 5 lakh policy for 10 years. But for higher age groups, others may offer a better deal. Therefore, the emphasis that the premiums are only illustrative.

One more aspect to be kept in mind is that the premiums are linked to the general health of a policyholder. Premiums finally charged may be higher (in relation to the tables) following a medical examination. One more reason to emphasise that the premiums with table are only indicative.

(Concluded.)

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