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Should I say I don't smoke when buying a policy?

May 17, 2019 09:41 IST

'If you are a smoker, you should not provide misleading information to the insurer about your smoking habit in the insurance proposal form,' advises Pankaj Razdan.
Illustration: Dominic Xavier/

Illustration: Dominic Xavier/

I am a smoker and intend to buy a term plan. I plan to quit smoking soon. Is it okay if I declare myself as a non-smoker when purchasing the policy?

Typically, an applicant of a term plan is required to have refrained from smoking cigarettes for at least 12 months to qualify as a non-smoker.

But life insurance companies approach the issue a little differently.

Most companies have more than one category for non-smokers.

If you are a smoker, you should not provide misleading information to the insurer about your smoking habit in the insurance proposal form.

If the insurer finds out later that you have lied about your smoking habit, there is a good possibility that the claim would be rejected.

Also before purchasing a life insurance policy, usually one has to undergo a medical test.

Even if you quit smoking at the time of policy purchase, it's better to mention that in the past you had been a smoker.

Is it recommended to go for an accidental death benefit rider with my term plan? What are its the benefits?

Treating an accident involves considerable expense, and if it turns out to be fatal, the family would be left with no source of income.

The double jeopardy of medical expenses and permanent loss of income from the death of the breadwinner can be financially as well as emotionally straining.

This is where the accidental death benefit rider can prove beneficial.

The rider safeguards the family from accidents or mishaps resulting in death, wherein the insured gets an additional amount equal to the rider's sum assured, over and above the term plan' sum assured amount.

Moreover, these extra benefits that strengthen a term plan come by shedding only a few extra bucks.

Is there any income-based restriction on the limit of term-insurance cover one can buy?

The minimum and maximum sum assured that is allowed for term insurance plans vary from plan to plan and insurer to insurer.

For most term insurance policies, there is no limit as to what can be chosen as the maximum sum assured, provided it is in line with the insurer's underwriting norms.

It is best to opt for a sum assured that is 10 to 20 times your annual income.

An insurer would evaluate your yearly income and premium payment capacity along with other factors like age, health condition, etc, before issuing a policy.

Typically, how long do insurers take to settle a claim? Has the regulator specified time lines within which an insurer has to settle the claim?

According to regulations, at the onset of the claim settlement process, the insurer has to seek the primary documents.

Any query or additional documents has to be asked within 15 days.

A claim has to be paid or disputed giving all relevant reasons within 30 days.

In case of any dispute, an insurer has to initiate and complete the settlement within six months of policyholder lodging the claim.

The regulator prohibits insurers from denying claims that come after three years of buying a policy.

I am going to purchase a term plan online. In case I change my mind and want to opt out from the policy, what is the procedure for surrendering my policy in the free-look period?

The free-look period lasts for 15 days from the date of receipt of the hard copy of the policy or the online policy document.

In case you would like to surrender your policy, you will be required to submit an online/written application for the cancellation to the insurer within the stipulated period.

You will have to fill a cancellation form and return the original policy copy.

You are not obliged to specify any reason for the cancellation.

The full initial premium will be refunded to you subject to deduction of mortality charges for the covered period, stamp duty charges, and costs incurred by the insurer for medical examination.

About five years ago, I had invested in a unit-linked insurance plan (Ulip) of a renowned insurance company. The returns from the equity funds have not been promising. Now that the lock-in period is over, is it wise to exit the Ulip and invest the money elsewhere?

Ulip is a product which combines the benefits of investment and protection.

We all invest in financial solutions to meet the respective life goals.

Check the corpus that your Ulip has generated and see if it is fulfilling the purpose for which you had invested.

You need to analyse if it makes more sense to stay invested, or exit from it.

Ulip is a long-term product and gains are made when you stay invested for the longer term, ignoring short-term fluctuations.

It is, therefore, advisable that you consider all the points mentioned above and then decide.

In case you surrender the Ulip, you will not have to pay surrender charges as the policy has completed five years.

Pankaj Razdan
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