Under term plan, it’s ideal to declare change in smoking status

Nov 13 2012, 04:20 IST
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SummaryPremiums paid towards a life insurance policy are exempt from tax under Section 80 C and maturity proceeds are exempt from tax under Section 10, subject to conditions.

I have a moneyback policy that will mature in December. Do I have to pay tax on the maturity amount?

— Ankur Panda

Premiums paid towards a life insurance policy are exempt from tax under Section 80 C and maturity proceeds are exempt from tax under Section 10 (10D), subject to conditions. In case of life insurance policies issued on or after April 1, 2012, exemption under Section 10 (10D) will be available only if the premium payable in any of the years is not more than 10% of the sum insured.

I had taken a term policy online two years ago where I mentioned myself as a non-smoker. Now, I have started smoking. Do I need to disclose it to my insurance company?

—Yatender Kumar

Refer to the terms and conditions of your specific policy as it may contain guidelines in this regard. In a regular term plan, the insurer usually factors in all possible risks while calculating the premium, at the time of policy issuance. In such cases, it may not be required to declare that you have started smoking, unless otherwise specified. However, if you have availed a special non-smoker rate, you may have signed a declaration on your non-intention to smoke even in the future. In such cases, you must go back and declare the change in your smoking status. On disclosure, your insurance company may decide to charge you smoker rates during renewal.

If I have to look at accumulating funds for my son’s education with some element of insurance cover, what kind of policy should I opt for?

— Poonam Gupta

Depending on your risk appetite, you could opt for an insurance plan of either traditional or Ulip variety for the purpose. Opt for a plan where you are the insured and your son is the beneficiary. He will get the benefits irrespective of your presence, ensuring that plans for his education are not disturbed.

I would recommend that before the purchase, determine the cost of planned education at the future point and opt for a sum assured that reflects this amount. This can be arrived at by factoring inflation over the time to the event to the cost of similar education on the current date.

There are two types of child plans available. One that pays out the sum assured to the child at the policyholder’s death or maturity or survival benefits at policy maturity to policyholder.

The second is a more evolved product

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