Life Insurance

When can a nomination be done?

To begin with, ‘nomination’ is the process of identifying a person to receive the policy amount in the event of death of the policyholder. The nomination can be done at the start of the policy by providing details of the nominee in the proposal form. However, if the nomination is not given at the beginning, it can be done at a later date. This nomination has to be effected by giving notice in a prescribed form to LIC and getting it endorsed on the Policy Bond.

The policyholder can change the nomination at any time during the term of the policy and for end number of times. For this, the policyholder has to give a notice in a prescribed form to LIC. Further, nomination can be removed any time by the policyholder without giving prior notice to the nominee.

Under nomination, the nominee gets only the right to receive the policy amount in the event of the death of the policyholder; nomination does not pass on the property in the policy. If nominee dies when the policyholder is still surviving then the nomination would be ineffective. If nominee dies after the death of the policyholder but before receiving policy amount, then again the nomination becomes ineffective and only the legal heirs of the policyholder can claim money.

How do I surrender my policy?
If premiums are paid for at least three consecutive years, the Policy acquires a Surrender Value. The Policy, which has acquired a Surrender Value, can be surrendered for payment in cash. Once the Policy is surrendered the contract is terminated. In the case of ICICI Pru Single Premium Bond the policy can be surrendered after the first year.
How do I revive my policy that has lapsed?

If your policy has lapsed on account of non-payment of premium within the specified due date, you can re-apply to reinstate it, if:

You apply within 5 years from the date of the first unpaid premium and before the maturity date

You pay all the required premiums and interest

You give us satisfactory evidence of health at your own expense The reinstatement will take effect only if we accept your application. We will notify our acceptance to you.

What is nomination of the policy?
Section 39 of the Indian Insurance Act 1938 provides for nomination of a person who would receive the benefits of the claim on the death of the life assured. Nomination establishes a clear title to the policy. This prevents dispute and also prevents delay in settlement of a death claim. In the case where nomination has not been given at the time of proposal, nomination can be made at any time during the term of the policy. Nomination can also be changed, at any time during the tenure of the policy, by intimating respective insurance company
Can I change my nomination?
Yes. You can change your nomination at any time till the maturity date. All you need to do is to inform us about the change through a specified form.

Non Life Insurance

Can motor policies be issued for a longer term than a year?

No policy can be issued for a period of more than one year ordinarily. However, for motor cycles and scooters only, the Act Policy in Form A, which is the minimum compulsory insurance required by law, may be issued on a long term basis. Such policies once issued remain valid up to the cancellation of the registration of the vehicle by the Regional Transport Authority (R T A).

This insurance is particularly useful for owners of comparatively older vehicles, for whom the Comprehensive Cover becomes a little too expensive considering the age and market value of the vehicle. The premium for such insurance is charged in accordance with the Long Term Act Policy Premium Schedule.

Can motor vehicles be insured against fire and theft risks only?

Yes.

Private Cars, motor cycles, scooters and commercial vehicles can be insured against Fire & Theft Risks only, provided they are laid up in the garage and not in active use. The insurance company under such cover shall only be liable to indemnify the insured against loss or damage by:

  • Fire
  • Explosion
  • Self-Ignition or Lightning
  • Burglary
  • Housebreaking or Theft and Riot
  • Strike
  • Malicious and Terrorism Damage

In case of vehicles that are in use, Fire & Theft Risks only can be covered with the Act Liability Risks.

Does a third party claim affect the bonus/ malus rate under the comprehensive motor insurance policy? The Bonus/Malus concept is applicable only to the Own Damage Section of the Comprehensive Policy.

The Bonus/Malus concept is applicable only to the Own Damage Section of the Comprehensive Policy.

The discount or loading is accordingly allowed or charged on the Own Damage portion of the premium. The Act Liability or Third Party premium is absolute. There is no scope for adjustment. As such, an accident giving rise to a Third Party claim, whatever the amount, does not affect the application of Bonus/Malus at the time of renewal of the policy.

Are accessories and extra fittings of the vehicle covered under the comprehensive motor insurance policy?

Accessories are generally those parts which are directly supplied by the manufacturer along with the vehicle. But they are not essential for the running of the vehicle. The engine of a vehicle is essential for its running and obviously not an accessory. A spare tyre, is however an accessory. Loss or damage to accessories are covered only if they are on the vehicle.

In case the accessories are detached from the vehicle and kept in a garage and are destroyed by fire, they are not covered. Radios, tape recorders, air conditioners and other electrical or electronic items are fitted by vehicle-owners. These cannot be considered as accessories. These items qualify as extra fittings and the owner has to specifically describe and mention separate values towards them at the time of insurance.

Only on payment of the requisite additional premium, can they be covered. However, if such items are built-in and supplied by the manufacturer, will be treated as accessories and need not be separately insured.

What happens if at any point of time there are in existence two policies for insurance of a vehicle?

This situation is one of Double Insurance. In such cases, one of the policies is cancelled, provided there are no claims reported in either of the policies.

Refund is granted on a pro rata basis for the period both the policies are in force concurrently. If one policy is applicable during the period 1.1.2000 to 31.12.2000, while the other is from 1.3.2000 to 28.2.2001. In case the first policy is cancelled on 1.4.2000, refund is made on pro rata basis for the period 2.4.2000 to 31.12.2000. In case the second policy is cancelled on 1.4.2000, then the refund is made for the period 2.4.2000 to 28.2.2001.

However if there is a claim on 1.4.2000, clearly both the policies will cover it. In such cases, the Contribution Condition of the policy is invoked, which states that each of the policies will bear its rateable proportion of the claim.

Mutual Funds

What if a fund sells a scheme to another fund?

If the fund plans to sell a scheme to another fund the asset management company has to take the permission of 75 percent of unit holders or allow them to redeem without any exit load. This does not mean that the investor has nothing to worry about.

You need to find out whether the scheme is going to be managed by a different mutual fund and whether it suits your objective. Also find out the past performance of similar schemes. Note that such a change may have a bearing on the future financial performance of that fund. In case you are not comfortable with the various changes associated with the fund ship out.

What if a fund decides to end its operations?
In such a case the trustees have to send a notice to the Securities Exchange Board of India (Sebi) explaining the reason for winding up. The notice also has to be published in two national dailies and a vernacular newspaper belonging to the region where the fund is formed.

What is a growth stock?
A popular investment style whereby fund managers identify companies showing promise of above-average earnings through capital appreciation. Stocks are held primarily for price appreciation as opposed to dividend income. Thus the fund managers of the growth stocks are willing to pay a premium to acquire a stock if they feel it has the further growth prospects. Growth investing is an alternative to value investing.

What is passive investing?
This is the investment style espoused by index fund managers who simply invest by benchmarking their portfolio to a common stock market index like the BSE-30 or the SP CNX-50. The fund manager only invests in stocks in the index stocks in exactly the same weightage. The attempt is to simply replicate the benchmark index, as closely as possible and therefore it is called passive investing.

What are Gilt schemes?
Gilt schemes invest in government bonds, money market securities or some combination of these. They have medium to long-term maturities, typically of over one year and have moderate returns. Since the issuer is the central or state Governments, these funds have reduced risk of default and hence offer better protection of principal.

Loan

Now that I've applied for my loan, what are the modalities involved?

After filling in the application, the ball is in the financiers’ court. What they do is basically assess your credit worthiness and your ability to return the principal and interest on schedule.

How do financiers go about assessing my loan application?

On receiving a loan application from you, a lender basically tries to check the likelihood that you can and will repay the money. He does so by examining, rather in a textbook fashion, the “Three Cs” – character, capacity and credit.

Here’s what they mean.

Character:

A lender gets to know of your financial and personal character through such details as how long you have lived in one place and how long you’ve been working at your current and previous jobs.

Capacity:

This basically refers to your ability to repay the loan given your income and savings. To estimate your capacity, a lender looks at your existing living expenses, debts on loans you’ve taken earlier and the additional strain the new loan would impose on you. All this information comes from your loan application itself. Don’t try and hide details of your existing loans from the potential lender of the new loan – everything can easily be discovered through your bank statement. Avoid any cloak-and-dagger stuff, it will only work against you!

Credit:

Basically, this is test of your willingness to repay loans on due dates. The lender will look at your track record of current and past credit relationships. Do you pay your credit card dues on time, or do you habitually exceed limits? What are your current credit limits, and how close are you to those limits? All the answers would be factored in to arrive at a creditworthiness statement.

How soon will I get my loan money?
Quite speedily! Usually banks promise to disburse your loan within seven working days. To make sure that happens and to avoid any unnecessary delays, you should keep all your documents ready, especially the post dated cheques (PDCs). The bank from which you are getting your PDCs requires at least a day’s notice to give you the cheques, so keep that in mind as well.

Will I need to provide any collateral's for my loan?
No, that’s the best part about personal loans! No collateral’s, no guarantees. In fact, personal loans have been especially designed for people like you – who don’t want to go through the hassles of providing security or hypothecation. The only time banks do ask for a guarantor or a co-applicant is in the case of software professionals.

What exactly is a personal loan?
A personal loan is a large sum of money given by a bank to an individual for purely personal reasons. In short, you don’t tell the bank what the money will be used for. A personal loan is easy to get, as you do not have to provide any security or collateral except your own repayment ability and financial standing and is ideal if you need the money urgently.

Small Saving Schemes

Can the income tax exemption under Section 88 be claimed by second named person in case of joint holding of National Saving Certificates?

The deduction under Section 88 of the Income Tax Act, 1961 can be claimed by the person who has contributed money out of his income chargeable to tax. It can be claimed by first holder or second holder, depending on who has contributed the amount in case of a joint holding.

Can one claim the section 88 benefit on interest on the NSC VIII scheme which is deemed to have been reinvested?

The interest accruing at the end of each year and deemed to have been reinvested upto 5th year qualifies for tax rebate under section 88 of Income Tax Act.

Will the rebate in income tax under Section 88 be available to husband/father where the NSCs (VIII-Issue) are purchased by him out of his income in the name of his wife/minor children? Rebate under section 88 will be available to husband/ father were NSC (VIII-Issue) are purcha
Rebate under section 88 will be available to husband/ father were NSC (VIII-Issue) are purchased by him out of his income in the name of his wife/minor children however, father/husband cannot claim rebate under section 88 of the ITA where the investment in NSC-VIII is made out of the income of wife/minor child.

If the holder of a Savings Certificate dies, who gets the amount due to be paid to the deceased?

Similar to bank accounts, a nomination facility is available for savings certificate schemes and the nominee is liable to receive the proceeds due to the deceased person.

If a person dies, and is at the time of death the holder of a savings certificate, and there is no nomination in force at the time of his death and probate of his will or letters of admiration of his estate or a succession certificate granted under the Indian Succession Act, 1925 (39 of 1925) is not within three months of the death of the holder produced to the prescribed authority, then if the sum due on the savings certificate does not exceed such limit as may be prescribed, the prescribed authority may pay the same to any person appearing to it, to be entitled to receive the sum or to administer the estate of the deceased. In case of minors where no nominee has been appointed, the payment can be made to any guardian of the property of the minor appointed by a competent court, or to either parent of the minor.

If a girl makes a deposit and gets married by the time the deposit matures, would there be any problems?
Any deposit made by, on or behalf of, a married woman, or on behalf of a woman who marries afterwards, can be paid to her, whether or not section 20 of the Indian Succession Act, 1925 (39 of 1925) applies to her marriage. And her receipt for money paid to her under this section shall be a sufficient discharge therefore.