|NIL - 29/08/2012
Source: The Financial Express
I am planning to invest Rs 10 lakh in an annuity product. What will be the monthly pension that I will receive and what will happen to the principal amount in the event of my death?
The annuity rates will depend on the type of annuity chosen. For instance, in life-time annuity, annuity is paid till the person is alive and there is no return of the purchase price even if the individual dies mid-term, whereas in lifetime annuity with return of purchase price, the annuity is paid till the person is alive, and the single premium paid for purchasing the annuity is given back to the nominee on the death of the individual. There are other options like annuity with term guarantee where the annuity is paid out for a fixed term, irrespective of the individual’s mortality status; if the individual survives the term, the annuity continues for life.
How are surrender charges calculated? What are the changes that Irda has proposed?
In Ulips, the surrender charges are capped year-wise and progressively decrease with each year until the fourth year. From the fifth policy year, there are no surrender charges. In traditional plans, generally the surrender value is calculated as a certain percentage of the total premiums paid till date, excluding first-year and rider premiums, if any. It must be remembered that insurance products are designed to release their value over the longer term and short-term discontinuance and surrender almost always proves a losing proposition for the policyholder.
Can I change the nominee in my life insurance policy?
Yes, you can cancel the current nominee(s) and replace them with new nominees, add new nominees and reassign nomination percentage. Your insurer will guide you through the specific process.
What is the limit of life cover in Ulips? In the long run, is it better to go for a pure term plan?
For entry age below 45, the minimum sum assured is 125 percent of the premium in case of single premium contracts and higher of 10 times the annualised premiums or (0.5 X term X annualised premium) in case of regular and limited pay. For entry age above 45, the minimum sum assured is 110 percent of premium in case of single premium contracts and higher of seven times the annualised premiums or (0.5 X term X annualised premium) in case of regular and limited premium paying contracts. In all cases, death benefit would be 105 percent or more of the total premiums (including top-ups) paid. Both term plans and Ulips cater to different needs. Term plans are pure protection plans with no investment component. On the other hand, Ulips systematically invest money in equity or debt funds, which have shown to give better returns over the longer term. The key is to stay invested over the entire policy term to get the best possible return.