BURGLARY POLICY

I have a burglary policy for my belongings, including jewellery. I went to a wedding, where I lost one of the pieces of jewellery I was wearing. Will I get compensation for it?
From your question it is not clear which policy are you holding to cover your belongings, including the jewellery. If you have a stand-alone burglary policy on the premises, the loss will not be payable. However, if you have covered your jewellery, under the ‘all risks’ section of the householder’s policy, you will be entitled to claim the loss of the jewellery from your insurers. In order to be able to claim the loss, you must inform the police.

PET ANIMAL INSURANCE POLICY

I plan to move my pet dogs from Ahmedabad to Delhi by train. Can I insure the dogs for the journey?
There is no particular insurance to cover the pet dog for the journey. However, you can always take a pet dog insurance policy, which will provide coverage to your dog anywhere in India, including the journey from Ahmedabad to Delhi by train.

NO CLAIM BONUS

If I change my health policy from one company to another, can I carry over my no-claims bonus?
When you change your health policy from one company to another, usually the company renewing the policy will give you the credit for the accumulated bonus earned by you during the previous policy periods. Some insurers pass the benefit of no-claims bonus on the basis of renewal notice issued by the previous insurer. Some may, however, first renew the policy without mentioning the amount of no-claims bonus credited on the face of the policy and later pass an endorsement to that effect after receiving a written confirmation from the previous insurer in respect of no-claims bonus. The policy renewing company may also ask you to undergo a medical examination before the grant of the policy.

PENSION PLAN

I purchased a Jeevan Nidhi policy from LIC, choosing the deferment age of 50 years for pension. What happens if I die before the age of 50?
In case of Jeevan Nidhi policy of LIC, on the death of the life assured during the deferment period of the policy, that is before the annuity vests (in your case it is the age of 50 years), an amount equal to the sum assured under the basic plan along with the accrued guaranteed additions, simple reversionary bonuses and terminal bonus, if any, will be paid in a lump sum to the appointed nominee. The nominee will also have the option to buy an annuity with the amount payable to him/her.

LOSS OF POLICY DOCUMENT

The term of my life policy is over but my policy bond seems to have been lost. What is the procedure of making a claim under such circumstances?
First of all you need to inform your policy issuing office about the loss of bond. You have to fill a form and return it to them along with some documents. If the claim amount is less than Rs 5,000, you will have to submit a simple indemnity letter along with the discharge form and a Declaration of ‘No Assignment’ of the policy. However, if the claim amount is more than Rs 5,000, you will have to submit the documents mentioned above as well as a surety having sound financial status to get your claim released.

POLICY PREMIUM

Can an insurance company increase the amount of premium after the commencement of the policy?
Typically, when you buy an insurance policy, you enter into an agreement with the insurance company. It is a fixed price (premium amount) that you agree to pay in order to remain insured for the term of the policy. Thus, such a price (or the premium amount) is pre-fixed through an agreement and the insurance company cannot increase the same later. However, although once fixed the premium on a policy cannot be changed, the amount payable by you can increase with the levy of taxes by the government; for instance, due to the introduction of service tax on life insurance policies.

UNFORGETFUL

I took a life insurance policy last year. Since there was no reminder from the company or the agent, I forgot to pay the premium this year that was due in October. Will my policy be cancelled or will they take a late fee and let my policy continue?
It actually depends on the terms of the issue of the policy. Generally speaking, any insurance policy lapses if the due premium is not paid within six months of the date when the premium became due. In your case the premium is late by about three months. You should approach the policy issuing office and get the figure of total amount due as on date along with the interest. On payment of the dues, your policy will be regularised.

INSURANCE POLICY

I am 28 and I want to take an insurance policy, which can also give me tax benefits?

Which one should I go for? If you want adequate insurance cover along with income tax benefits, the best option for you is to go for a term insurance policy. Since the premium in a term policy is quite low as compared to endowment covers, one is able to get adequate coverage. The premium paid on these policies also qualifies for deduction under Section 80C of the Income Tax Act, 1961. You may go for term insurance policy offered by any of the life insurance companies. Since they are covering pure risk only, their premiums and terms are similar.

MONEY BACK POLICY

Four years back, I bought a money-back endowment plan. The first money-back instalment is due next year. Now, I am finding the annual premium of Rs 10,000 too expensive, and don’t want to continue with the policy. Should I surrender the policy at this stage and switch to a term insurance policy, which is cheaper?
If you surrender the policy at this stage, you will get only the surrender value, which will be just about 50 per cent of what you have already paid. Therefore, in my view it is not advisable to surrender the policy at this stage. It would be best to continue. You can meet some of your premium obligations from the periodic money-back installments that you will get under the present plan.

MY PENSION

My pension plan is maturing next month, but I am already getting a government pension. Is it possible to get the returns in bulk so that I can invest the amount somewhere else?
To get a lump sum amount you can always withdraw a portion, though not the whole amount, of your pension receivable under the policy. This type of withdrawal is called commutation. This amount would be tax-free and can be invested elsewhere by you. Normally, it is possible to commute up to one third of your pension amount. You can receive a lump sum amount against the commuted portion and the balance amount will come in the form of monthly pension. The exact amount available for commutation, however, depends on the terms and conditions of your pension plan.

PROFIT

What are ‘with profit’ and ‘without profit’ insurance plans?
Policies that participate in the profit of an insurance company are called ‘with profit’ policies, while the policies on which the amount of bonus is fixed at the time of issue itself are called ‘without profit’ policies. This means that irrespective of the profit earned by the insurers, the policyholders of without-profit policies will get fixed returns on the amount they have invested. Whereas, in the case of with-profit policies the amount of bonus payable is based on the net surplus earned by the insurers. Therefore, returns on these varies from year to year and can be more or less than the returns on without-profit policies.

I had taken a loan from my existing life insurance policy, which I repaid along with my quarterly premiums. Will my final returns from the policy be affected in any way?
Once you take a loan on a life insurance policy, it is independent of the returns under the policy. Insurance companies charge interest on the amount of loan advanced against the policy. Once the principal amount, along with the interest, is repaid, it does not have any affect the final returns from the policy.

PORTECTION OF POLICY

Can the proceeds of a policy be protected against creditor’s claims in the event of the insolvency of a policyholder?
The proceeds of a life insurance policy can be protected against the claims of creditors under specific circumstances. One, if the policy is issued under the Married Women’s Property Act and, second, if the policy is legally assigned in favour of a third party. The option of taking a policy under the MWPA has to be exercised at the time of taking the policy. It cannot be done later. A policy that has been legally assigned in favour of somebody becomes that person’s or assignee’s property and, therefore, cannot be attached by the creditors of the policyholder.

DECLINE OF CLAIM

I bought a house in June 2007. The fire insurance policy on the building acquired by the previous owner is valid till March 2008. Can the insurance company decline to pay a small loss, which occurred in July 2007, on the pretext of change of ownership?
As per the conditions of the fire insurance policy, the interest of the insured in the insured property must exist at the time of buying the policy and also at the time of occurrence of loss. Typically, the policy gets cancelled on the sale, or transfer of property. Therefore, in your case, since you were not the owner at the time of the inception of the policy, you would not be eligible to prefer claim under the fire insurance policy.

FAMILY MDDICLAIM POLICY

I am 40-year-old diabetic. My wife is 37 and child seven. Am I eligible to take a family mediclaim policy?
You can certainly secure a family mediclaim policy for your family. Since you are already suffering from diabetes, it will be excluded from the scope of the policy. Your wife and child can have a normal cover according to the terms and conditions of the policy, which you choose.

PLEASE GUIDE ME

I have bought a house in Delhi. What kind of insurance should I look at?

You need to ensure the building and the contents of the house. For the building, you can take a separate policy, covering the risks of fire and allied perils. You can also add a cover for earthquake. Alternatively, you may buy a comprehensive householders’ policy. This covers the building and also its contents against various risks. You can also cover your electrical equipment against the risk of breakdown. Jewellery and other valuables can be covered against all risks, including loss within the geographical territory of India.

INDEMNITY POLICY

What does a professional indemnity policy for lawyers include?
Professional Indemnity policy issued to lawyers, advocates, solicitors and counsels is basically meant to cover liability falling on them as a result of errors and omissions committed by them while rendering professional service. The policy covers all sums, which the insured professional becomes legally liable to pay as damages to a third party in respect of any error and/or omission on his/her part committed while rendering professional services. Legal cost and expenses incurred in defence of the case, with the prior consent of the insurance company, are also payable, subject to the overall limit of indemnity selected. The policy, however, covers only the civil liability claims. Any liability arising out of any criminal act, or act committed in violation of any law, is not covered. The sum insured under the policy is referred to as the limit of liability in a professional indemnity policy. This limit is fixed per accident and per policy period, which is called any one accident limit and any one year limit, respectively.

RAILWAY COVER

Does railways give cover to its passengers? If yes, what kind of cover is it?

Yes, the railways does provide personal accident insurance cover to the passengers. The cover is provided to bone fide passenger ticket-holders, platform ticket-holders and season ticket-holders. Children up to the age of five years, who are not required to buy tickets, are also covered, provided they are travelling with ticket-holders. The compensation for injuries sustained varies between Rs 32,000 and Rs 4 lakh as defined in the schedule of injuries under the Railways Act, 1989. The policy covers all the passengers in the railway premises. For any unscheduled injuries, the compensation of up to Rs 80,000 may also be given. The compensation amount is decided by the Railways Claims Tribunal. Once the claim is decided by the tribunal, the insurance company reimburses the claim amount to the railways.

INSURANCE OMBUDSMAN

I want to file a complaint against my insurance company for the mental agony I have suffered due to the inordinate delay in the settlement of an insurance claim, which necessitated, among other things, repeated visits to its office. What is the procedure for filing a complaint with the insurance ombudsman?

First, you need to approach the insurance ombudsman under whose jurisdiction the servicing office of the insurance company against which you want to complain falls. The complaint must be in writing and accompanied by the documentary evidence of the circumstances giving rise to the dispute, nature of loss sustained and relief sought from the ombudsman.
The ombudsman will first try to settle the dispute through mediation between the parties involved. If a settlement is reached through mediation, he will make recommendations as he deems fit, within one month from the date of receipt of the complaint.
If the complaint is not settled through mediation, the ombudsman will pass an award, which he thinks is fair in the light of the facts and circumstances of the complaint. Such an award is passed within three months from the receipt of the complaint. If the award is acceptable to the complainant, in this case you, the insurance company needs to comply with it without fail. If the ombudsman deems fit, he may award an ex-gratia payment.

FLOATER POLICY

My son is admitted to a hospital for a heart problem. My husband’s medical policy provided by his company is covering part of the expenses. Will our family floater policy cover the remaining expenses? Can two policies be used together for a single expenditure?
Both the medical policies can be used simultaneously for the same incident of disease. In fact, under the terms of all insurance policies, you are obliged to disclose the details of all the policies operative on the day of hospitalisation.
All mediclaim policies pay the insured in the proportion of the sum insured under respective policies. You can file the claim under any of the policies mentioning the particulars and the sum insured under the other policy. The insurers will automatically share the claim amount between them.

NO CLAIM BONUS TRANSFER

Can a no-claim bonus on a health policy be transferred from one insurance company to another?
A no-claim bonus is a discount given by insurance companies to the insured at the time of renewal of policy if the insured has not filed any medical expenses claim in the last one year. A no-claim bonus is given either as a discount in the premium or as enhanced cover without the incremental increase in premium. In this way, insurance companies also build customer loyalty towards them.
If you take a fresh medical insurance policy from a new company, you cannot get a no-claim discount as a matter of right. Insurers, however, do consider pervious history with the other insurance companies and give suitable discounts to attract new customers.

RENEW A LAPSED POLICY

I forgot to pay the premium of my life insurance policy and the policy lapsed. How can I revive my policy?
A policy lapses if the premiums are not paid within the due date or the grace period permitted by the insurance company. However, a policy that has lapsed can be revived within five years from the date of first unpaid premium. In your case, your policy can be revived under the ordinary revival scheme. For this all the arrears of unpaid premiums with interest will have to be paid. Along with this the insurers may ask you to submit a ‘Declaration of Good Health’ (form no. 680).

PARTIAL WITHDRAWAL IN ULIP

I took a unit-linked insurance plan (Ulip). I have paid the premium for six years. I want to withdraw some of this amount. Should I make partial withdrawal or surrender the policy?
The decision to choose between partial withdrawal and surrender should depend on the severity of your need and the returns from the policy. Partial withdrawal is allowed only after the completion of the lock-in period (which varies from three to five years as per the terms of the policy). As you have paid premium for six years, you can make partial withdrawals.
The sum assured as per your policy will be proportionately reduced by the amount of partial withdrawal made. Partial withdrawal is a good option if the Ulip fund is performing very well and you do not want to quit the policy. This way you can get the required amount as well as continue with the policy.
A policy can be surrendered any time after the lock-in period. The insurer will pay as per the prevalent market rate of the net asset value (NAV) of the units on the day of surrender. The decision to quit the policy should be taken only after considering the current and future returns from a policy.

POLICY AS A COLLATERAL

Can I use my life insurance policies as collateral when taking a personal loan from a bank?
Yes, you can use your life insurance policies as a collateral security for the loan liability. Banks usually insist on having a collateral security in addition to the primary security provided by the loan applicant. These can be in the form of certain financial assets such as National Savings Certificates (NSCs) or life insurance policies. Generally, this is done through the assignment of the policy.
Assignment of a policy means that the title, rights and benefits under the policy get legally transferred to another person or entity.
In this case, you can assign the policy in the name of the bank which is giving you the loan, thereby pledging the policy with the loan provider as collateral security.

TAX DEDUCTIONS

What tax deductions can I get for repayment of home loan?
Primarily, you can get two types of deductions for a home loan, one on repayment of the principal amount of the loan and the other on the interest on the loan. Whether you reside in your house or give it out on rent, the repayment of principal amount of loan will qualify for deduction under Section 80C. The maximum amount of deduction available for repayment of principal amount is Rs 1 lakh. Under Section 24(b), up to Rs 1.5 lakh can be claimed as deduction under the head ‘Income from House Property’ for the interest component of a loan in case of a self-occupied house. However, the full amount of interest can be claimed as deduction in case the house is given on rent.

APPLICATION DECLINED

I had applied for a credit card two months back. I submitted all the necessary papers. The bank executive assured me that I would be getting the card soon as I fulfilled the necessary criteria. However, a few days back my application was rejected. Is the bank within its rights to do so?
A credit card is like a non-secured loan. Therefore, the amount of risk associated while giving a card is higher for the bank compared to giving a secured loan like a home loan. Banks take many factors into account while evaluating an individual’s creditworthiness through the credit card application that you fill. Some of these factors include your income and job stability. Another major determinant is your residential address. Most banks have a list of negative areas. If you happen to live in any of these areas, your application may not be approved even if you qualify on other factors.
Recently, credit scores were introduced in India in which a person’s credit history is reflected in numbers. Banks and financial institutions have already started using these scores. They use this score as a major input while deciding your creditworthiness before extending any fresh line of credit, including a credit card.
Therefore, the bank is within its rights to reject your application.!!

CLASSES FOR ATM AND DEBIT CARD TRAINING

How can one learn how to use an ATM/ debit card? Do banks give such information?
W hen you open a savings or a no-frills account with a bank, apart from the cheque book and the ATM-cum-debit card, you also get an instruction manual that explains how to use your card. The manual talks about, among other things, the precautions that you should take while using the card, like keeping the PIN number in a secure place or making sure no one is watching when you enter the PIN while using the ATM.
If you go the bank’s website you can get a list of things you should keep in mind while using a debit card.

CRITICAL ILLNESS INSURANCE

I want to get a critical illness insurance cover. What conditions have to be fulfilled to get this cover?
A critical illness policy is available for specific critical illnesses named under the policy that you opt for. Such policies invariably include diseases like coronary artery surgery, cancer, stroke, renal failure, and many others.
Normally, such a cover is granted to the proposer whose minimum income from gainful employment is Rs 2 lakh or more (income tax return form to be submitted as proof). The pre-existing disease exclusion condition applies to this policy. No claims are allowed within 90 days of taking the policy and the insured person needs to survive for 30 successive days after the diagnosis of the critical illness in order to make his claim.

PAY PREMIUM THROUGH CREDIT CARD

Can I pay my insurance premium through a credit card? Do they charge any extra interest?
Yes, you can pay the premium of your life insurance policy through a credit card, provided your insurers have an arrangement to accept payment through credit cards. Nowadays, most insurance companies do have this option. Deduction of extra charges would depend on whether your credit card company has a tie-up with your insurance company. If they do have such an arrangement, then there will be no extra charge as long as you pay off the full amount due on the credit card by the due date.

POLICY DOCUMENT LOSS

I recently lost my life insurance policy papers in a fire. How can I get a duplicate copy?
You can always get a duplicate policy bond from your insurance company. For this you need to apply to your insurers in a prescribed form. In order to facilitate the verification process, give the company the premium receipt and other identification proofs.
Further, you may be required to submit an indemnity bond and pay the necessary fees for obtaining duplicate policy papers. Also, in cases where the policy documents have been partially destroyed due to natural causes like fire, flood, earthquake, or other such reasons, the physical remains of the half burnt or destroyed documents may be returned to the insurance company as evidence of loss of policy.

SERVICE TAX

Can service tax paid be deducted from income tax?
Service tax as such cannot be deducted from the income tax payable by an assessee. However, the entire cost of any service availed for the purpose of business, including the service tax paid, is considered a deductible expense while computing the income under the head income from business or profession. For example, your business telephone bill, including the service tax, is a deductible expense while computing the business income.

OOH!!!!!!!!!!!!!!! AAH!!!!!!!!!!!1 OUCH!!!!!!!!!!!!!

I was shopping online and just as I had entered my debit card details, the Internet connection broke. When I checked my account later, the amount was debited but the transaction was incomplete. The bank says the money will be credited to my account in the next billing cycle. What can I do if it isn’t?

Such issues usually get settled in the next billing cycle of the debit card, so it is better if you wait till then. However, if the correction doesn’t happen, raise a formal complaint and get an acknowledgment. A complaint raised over the telephone does not have any legal standing, so do it in writing or by email. If the bank does not take any action, you should complain to the banking ombudsman that has jurisdiction over your area (www.bankingombudsman.rbi.org.in).

ATM MACHINE IS A MACHINE AFTER ALL

An ICICI Bank ATM declined the transaction when I tried to withdraw money using my SBI debit card a month back but the money was deducted from my SBI account. Both the banks told me that SBI would resolve the issue. But the SBI manager concerned is refusing to take it up, saying that he hasn’t handled such a case before. What action can I take?
Since you haven’t been able to get a response directly from the person concerned in SBI, you can send a complaint through the bank’s website. If you do not get a satisfactory response in two to three weeks, approach the banking ombudsman (www.bankingombudsman.rbi.org.in).

I want to purchase land. Which banks give loans for that?
Not all banks or housing financing lending institutions extend land loans since there is difficulty in documentation and security of the property (risk of encroachments). Most banks that offer these loans insist that the land be purchased from a development authority or from a society. Some banks also permit purchase of land from a developer.
Banks and lenders such as Standard Chartered Bank, Indian Bank, Bank of India, UCO Bank, State Bank of India, HDFC Bank, Housing Development Finance Corporation (HDFC) and LIC Housing Finance give loans for purchasing plots or land.

ONLINE PREMIUM PAYMENT

I want the annual premiums of my policy to be automatically debited from my bank account, or get paid online. How can I do this?
First, you need to check with your life insurer if they provide an online payment service. Generally all insurance companies have a list of banks (where you need to have an account) or specific credit cards, through which payments can be made online. Also, you should have opted for net banking facility with that bank and/or credit card.
If you haven’t already done this, you can contact the bank, which will give you a form to fill in which you need to give a mandate for direct debit for the billed amount directly from your bank account. You will also have to give your bank account details and other requisite information to the insurance company. After this, your policy premium bill shall be sent to your bank and the bank will debit the amount from your account and remit the payment to your insurers.

LOAN AGAINST THE INSURANCE POLICY

I want to take a loan against my policy which will mature in another five years. How is the loan amount decided? What will happen if I am not able to repay the loan amount before the policy matures? Will the policy period be extended or put on hold?
The loan amount against a life insurance policy is calculated on the basis of the surrender value (SV) of the policy at the time of taking the loan. The loan amount is generally around 85 per cent of the SV. The interest rate charged varies from company to company and time to time. A policyholder can repay the loan amount either in part or in full, any time during the term of the policy. If the loan amount is not repaid during the term of the policy, or in case of an early claim, the amount of loan plus interest, if any, is deducted from the claim money and the balance is paid to the claimant. The policy period is neither extended, nor put on hold on account of settlement of the loan amount.

COLLATRAL OF LIFE INSURANCE FOR LOAN

I have given my life insurance policy as collateral for my home loan. For this I had to assign my policy in favour of the bank. Can I cancel this assignment at any future date? How will I get my policy back?
Assignment is a means whereby the beneficial interest, rights and title under a policy get transferred from the assignor to the assignee. ‘Assignor’ is the policyholder who transfers the title and ‘assignee’ is the person who derives the title from the assignor. When you assign the life insurance policy in favour of a bank or any financial institution, as a collateral security, the nature of assignment is conditional. This means that as and when the loan is cleared, the rights under the policy are transferred back to the assignor.
You can’t cancel the assignment yourself. Once the loan gets cleared, you will get the policy back.

SIMPLE POLICY

Which policies don't have high charges and are simple?

The simplest form of life insurance is the pure risk cover, also known as term plans. A pure risk cover works like a contract that provides a specified death benefit, but no cash build-up or investment component. The guaranteed sum assured is only for a specified term, usually one year, and the policy is renewable at the end of each term period. The policy term can be longer also, but will be effective only when premium is paid each year. Since the premium for risk cover is low, one can get adequately insured for a relatively low premium cost.
Normally, there are two types of term policies—one returns the premium at the end of the term and the other doesn’t. Since you don’t want returns, you can go for the second kind. In this case, the premium will be the lowest.

ATM Usage Goes Free

From 1 April 2009, you will be able to withdraw cash free of cost from any bank’s ATM. Balance enquiry at all ATMs have been made free already.
The Reserve Bank of India (RBI) had found that ATMs were mostly being used for cash withdrawals and balance enquiry, even though they offer more services. Earlier, charges varied bank to bank and were also based on the ATM network used. The customer was not aware of the charges that could be levied for using another bank’s ATM, and this discouraged him from using the ATMs of the other banks.
The RBI has, however, allowed banks to decide the service charges for cash withdrawn using a credit card and cash withdrawals from ATMs located abroad. In a draft proposal in February, the RBI had proposed that ATM transactions be free of cost, and had sought public comments in this regard. Based on the feedback a framework of service charges will be implemented by all banks

PRE EXISTING DISEASES INSURANCE POLICY

I am suffering from mild haemophilia. Does any insurance policy cover pre-existing diseases?
Pre-existing diseases are not covered by any insurer immediately at the commencement of the first policy because it means that there is a 100 per cent chance of the insured making a claim and is against the basic principle of insurance, which provides covers for uncertain eventualities. You can still take a medical cover, but it will exclude expenses incurred on the treatment of any pre-existing disease. Some insurers, however, cover diseases which exist at the time of taking the first policy provided the policy is continuously renewed for a specified number of years. This period varies from insurer to insurer and is generally between two and five years. Such policies are obviously slightly more expensive than normal medical covers.

PROFESSIONAL IDEMNITY POLICY

Are there professional indemnity policies for doctors?
Yes, there are professional indemnity insurance covers for doctors which primarily cover losses or liability arising out of professional negligence or, more particularly, a genuine error of judgement, for instance, error in diagnosing a patient. The policy covers all sums which the insured professional becomes legally liable to pay as damages to the third party on account of any error or omission on his part while rendering professional service. The legal expenses incurred in defence of the civil cases (criminal cases are excluded), with the prior consent of the insurance company, are also payable, subject to the overall limit of indemnity selected. The policy excludes wilful or deliberate acts of negligence. Financial setbacks due to loss of goodwill as a fallout of such cases and other similar acts specified by the insurer are also excluded from the policy.

KEYMAN INSURNACE

I am a partner in a security equipment exporting firm. We have been recommended to procure a Keyman’s insurance policy. Can you explain the policy and also who can buy it?
In insurance parlance, a person who is a major contributor to the growth of an organisation and whose absence may affect the continuity of the business is a Keyman. Keyman Insurance policy is mostly a pure term life cover to protect the organisation from adverse financial consequences arising due to death of the key person and ensure continuity of the business. If keyman leaves the company either the policy can be surrendered or assigned absolutely to the keyman. Your firm can also take such policy on your life.

LIC A GOVERNMENT ENTERPRISE

Is LIC a government enterprise and that our money is backed by a government guarantee?
Majority of the capital of Life Insurance Corporation has been subscribed by the government, and the Corporation makes an actuarial surplus of 5 per cent available to the government every year.
The Section 37 of the Life Insurance Corporation Act 1956 reads: The sums assured by all policies issued by the corporation including any bonuses declared in respect thereof... shall be guaranteed as to payment in cash by the Central Government. Therefore, LIC policies enjoy a sovereign guarantee to the extent of covering the basic sum assured and the guaranteed returns. The bonuses are guaranteed only once they are declared.

HRA

I have taken a home loan and am paying Rs 20,000 EMI. My wife jointly owns the house with me. We are living in that house. How should I declare my HRA to get maximum tax benefit?
You can claim the benefit against the house rent allowance (HRA) only if you are actually paying the house rent. Since you are living in the owned accommodation, you cannot claim the benefit of HRA. Your co-owning the house with your wife does not make any difference to the tax status. In your case, HRA is fully taxable.

TAX

I recently changed my job. As per the terms of employment, I had to pay my employers about Rs 2 lakh towards notice pay. This amount was reimbursed by my new employers. While making the payment they deducted the tax at source. If I am paying the tax on this amount, am I eligible for deduction on the payment made to my previous employers?
In terms of the Section 17(2) of the Income Tax Act, 1961, any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the employee is treated as perquisite and, hence, taxed as salary income. Your present employer is under obligation to deduct tax on this payment.
On the other hand, you will not get any deduction on the payment made as it was made to meet your contractual obligation with the former employer.

FIXED EPOSIT

I have terminated a Rs 2-lakh, three-year fixed deposit (FD) from a bank after just one month of making it on 30 April 2008. The bank paid me only Rs 50 as interest, stating the 4 per cent interest was adjusted for penalty charges for premature withdrawal. Is the bank justified in doing so?
Yes, the bank is justified in charging you a penalty if you withdraw the FD before the maturity period. The reason being that when you open an FD the bank invests the money in a manner that the returns are much higher than the rate what the bank has promised you.

PROCEDURE OF CLAIM

A couple of days back my shop was gutted in a fire. All the books of accounts and the computer were inside the shop at that time. I am insured for the last 10 years and there has been no claim till date. How will insurers compensate me without producing any records?
To assess the loss under any policy, insurance companies depute surveyors who are qualified professionals like chartered accountants or engineers. Depending on the case, they can devise a method to assess the losses.
In cases like yours, where there are no books of accounts, surveyors can assess losses on the basis of volumetric analysis of the shop such as the shop area and the shelf space utilised for keeping the items. A list can be drawn whereby the quantum of stock that can be stored can be determined. On the basis of this and the present price, the value of the stock can be ascertained.
They can also draw their conclusions on the basis of your transactions recorded in bank statements, sales tax returns, or IT returns, copies of which can be obtained.

ALL RISK COVER POLICY

I have taken a loan to construct a house. What kind of insurance can I get for my property while the house is still under construction? Please also explain the insurance policies available in the market for my house after it is ready.
While your house is under construction, you can get a contractor’s All Risk Policy which will provide a comprehensive cover for the risk exposures during the construction period. Among other risks the policy will cover the property against the risks of theft of construction material, damages due to vehicle impact and liability towards third parties.
Once the building is constructed you can insure the building against the risks of fire and allied perils like flood, storm, cyclone, earthquake, inundations, and others. Usually all general insurance contracts are for one year, but for a residential building you will also have an option to get a policy for 10 years at a time. Besides this, when you occupy the house you can insure its contents with a householder’s policy.

DOUBLE INSURANCE

My car was inadvertently insured twice with two different insurers. I feel there is no point in keeping both the policies. Which one should I cancel?
You are right in thinking that there is no point in keeping both the insurance policies. You should cancel the policy which was issued later. You will, in that case, get proportionate refund of premium. However, if due to some requirements of banks/financial institutions, you need to cancel the policy issued earlier, then refund of premium will be allowed only after retaining it at short period scale for the duration for which the policy was in force.

MEDICAL HISTORY OF MY FAMILY

Why is the medical history of my family relevant to an insurer issuing a medical cover to me?
Family medical history is taken into account before issuing health covers because the chances of the prospective policyholder contracting diseases such as heart ailments, diabetes and high blood pressure, which are considered to be hereditary, increases if members of his family suffer from them. However, you will be in no way become ineligible for getting health insurance, nor would your premium amount increase substantially if you do not suffer from any disease. You will only be placed in the high-risk category for diseases which run in your family. Most insurance companies seek information on the family health history of the person seeking insurance and the answers should be given with complete honesty to avoid any complications in the future.

COMPLETE LIFE COVER

I am 28 and about to get married. My annual income is Rs 7 lakh. I have a life cover of Rs 2 lakh. Should I buy more plans? If yes, which ones?
As you will be married soon, you should take adequate cover to protect the needs of your dependents. A number of factors will have a role in deciding the amount of cover you should take. Payment of premium might not be a constraint in your case, so you can choose from a variety of policies—term plans, endowment policies or Ulips, to name some. Ideally, you should buy a pure risk policy to take a high cover and also a pension plan to secure your retirement. Pension plans require long-term commitment and are best taken in the early stages of life. You may buy the covers from any insurers of your choice. You should ideally also have adequate health cover. A family floater health cover will suit you well.

PROPER DOCUMENT

My actual date of birth is 22 November 1967, but the date mentioned on all documents is 22 November 1965. Can I have an insurance policy issued to me on the basis of my actual date of birth? I do not have a birth certificate.
No, insurers require documentary proof of the date of birth of the insured before issuing a life cover because his age at the time of taking the policy forms the basis for determining his eligibility to take the policy and affects the premium amount. Mortality charges also depend on the age of the insured. Only documents such as the matriculation certificate, driving license, passport and PAN card are accepted as proofs of age. Also, in the absence of a birth certificate that validates your actual date of birth, insurers will take into account the date of birth given on other available documents.

FREE LOOK PERIOD

What is the free look period insurance companies provide to buyers of life covers?
The insured can cancel any insurance policy within 15 days of its receipt. In insurance parlance, this is called the free look period. The amount paid by the insured will be refunded with nil, or, in certain cases, marginal deductions by the insurer if the insured decides to rescind the insurance contract in this period after examining it. The Insurance Regulatory and Development Authority has made it mandatory for all insurers to grant a free look period of 15 days to policyholders from the date they receive the policy. A life insurance policy is a long-term contract and requires the insured to commit himself financially over a long time span. It is due to this fact that a free look period of at least 15 days is made available to the insured.

LOAN AGREEMENT

I took a loan from LIC Housing Finance, but I was not sanctioned the whole amount. My processing fees was also higher compared to others. I have not received the completed and signed copy of the loan agreement. I do not know what is the loan amount, the rate of interest, the period and the EMI. How can I get the copy of loan agreement and refund of excess processing fee?
Loan sanction is based on your loan eligibility and income. Also, banks provide up to 90 per cent of the cost of property. Hence, there may be a difference between the loan amount sanctioned and disbursed. Please approach the bank for a copy of the loan agreement to get details relevant to your loan.
Make an official complaint in writing and obtain an acknowledgement for a copy of the agreement, which is your right. If you do not get a satisfactory response within 2-3 weeks, you can complain to the National Housing Bank (NHB). It is a regulator for housing finance companies. Details are available on http://nhb.org.in/.

REINSTATEMENT OF SUM INSURED

What is meant by ‘reinstatement of sum insured’? Does it figure in all cases where the insurers settle the claims?
On payment of a claim under a policy, the sum insured automatically gets reduced by the amount of claim paid. In order to bring back the sum insured to its original level, the insured has to reinstate the sum insured by payment of a pro-rata additional premium on the amount reinstated. Reinstatement of sum insured does not figure in all claims. Particularly in insurance contracts pertaining to liability where the limits of the liability are specified against any one year and any one incident, the sum insured cannot be reinstated.

MEDICLAIM INSURANCE POLICY

Why should one buy a mediclaim insurance policy? What does it cover?
Technological advances and more effective medicines have driven up the cost of healthcare. Think about the enormous medical costs you would incur if you suffered a major accident or were suddenly struck by an illness. Uninsured people live with such risks every day.
Health insurance seeks to shield you from that risk. It provides the much needed financial relief in case you are faced with a medical emergency. The premium to take health (medical) insurance for self and family also gives a tax benefit as it is allowed as a deduction from income under Section 80D of the Income Tax Act. In a contract of health insurance, the insurer provides either direct payment to the institution or reimburses the expenses associated with illnesses and injuries requiring hospitalisation. The insurer normally provides a list of all the diseases and emergency situations covered under the plan.