I had purchased a Reliance HealthWise Gold floater plan to cover myself, my wife and two children in June 2007. The sum assured was Rs 1 lakh and my first premium was Rs 1,654. I have been renewing the policy every year. Now, the company has asked me to renew the policy with a premium of Rs 8,136 per annum (almost 6 times increase) .Till now I have not claimed under this policy. I want to know whether this hike is justified. What should I do with the policy? My age is 42.

Mohan Pellath

Reliance HealthWise policy was the cheapest in 2007, but over the year due to higher claims and unsustainable pricing, Reliance General Insurance was forced to hike premium steeply. The only option available at this juncture is to switch to other health plans offered by Reliance General Insurance. The company allows HealthWise policyholders to carry over the unclaimed bonuses. There will also be no waiting period in the new policy and the insured is allowed to claim as much as the sum assured in the previous policy. Do check the key benefits and if it matches your requirement, buy a new policy up to Rs 1 lakh.

Currently if you don't have any pre-existing ailments and if you wish to increase the sum insured by you, buy a policy with any other insurer.

I am 24 years, I had opted for Bajaj Allianz Family Assure in August 2008. I am paying premium of Rs 10,000 per annum (I bought this policy to help my friend).The sum assured under this plan is Rs 50,000. After three years my current fund value is Rs 21,309.

When I checked with Bajaj Allianz, they told about the high initial charges applicable on this ULIP and suggested that I withdraw once the policy completes 3 years (on August 2011) and invest in their other policy.

When will I get back at least my investment? Should I surrender and invest in gold instead or should I break down Rs 20,000 and invest in any equity mutual fund scheme.

Binin Kallumkal Sukumaran

Financial products should always be bought based on needs and goals. Often we come across individuals investing just for the sake of relationship or tax savings. This always leads to the purchase of a product that might not suit our requirement.

Going by your query, it appears that you have started savings without an investment or insurance strategy. While investing in ULIP it is always better to take an appropriate risk cover because the premium paid for the mortality is less than term insurance. Besides that ULIPs are long term investment products say 10-15 years. If your objective is to invest, considering your age and premium, it's prudent to continue the policy till the maturity.

If you surrender and re-invest the proceeds in another ULIP your agent and the company will be the beneficiaries and you will once again end up paying premium allocation charges and your current corpus will fall further. Having paid higher premium allocation charges in the earlier years, it's prudent to continue the policy to reap the benefits. If you have surplus, it's better to start a SIP in equity oriented MF schemes rather than investing in gold.

I have invested in ICICI LIFETIME policy in June 2006 paying monthly premium of Rs 2,500 and with this June the policy will complete five years. My query is that I have taken the tax benefit for this financial year, if I withdraw policy in June 2011 and still get the 80C benefit. Kindly clarify the same.

Mahesh Chand

Partial withdrawals or the surrender amount of a ULIP policy is exempted u/s 10 provided contribution to ULIP is paid for a minimum of two years. If however the policy is being discontinued before paying premium for one year then the amount claimed as a deduction under 80C in the past will be taxed in the year in which the policy is cancelled or surrendered. In your case since you have paid the premium for five year you can enjoy the 80 C benefits.

Queries can be sent to >insuranceplanning @thehindu.co.in , or write to- The Hindu, 859 and 860 Annasalai,Chennai,600 002.

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