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Frequently Asked Questions
  • Life Insurance

    How can one arrive at the claim amount on the LIC policy ?

    Subject to claim concessions, the net amount payable under a policy in settlement of its claim depends upon its status as on date of death. In case of a reduced paid-up policy which has not been specifically enclosed for paid-up conversion, LIC will pay the claim for the full sum assured instead of the paid up value provided certain conditions are satisfied:

    # The life assured died within 6 months from the due date of the first unpaid premium.

    # Premiums under the policy have been paid for a minimum period of 3 full years. Claims concession is not available on certain policies during the deferment period in case of Children's Deferred Endowment Assurance, Temporary Assurance and Convertible Term Assurance. Extended claims concession is an extension of the regular claims concession. Here, the claim for the full sum assured is payable under a reduced paid-up policy provided two conditions that:

    # The life assured died within one year from the due date of the first unpaid premium five years after the deferred date in case of CDA policies.

    # Premiums under the policy have been paid for a minimum of 5 years. However the claims concession is subject to the deduction of:

    # The premium or premiums unpaid with interest thereon up to the date of death. Unpaid premiums falling due before the next anniversary of the policy (except in Fixed-Term (Marriage) Endowment and Educational Annuity plans).

  • Who should sign the Discharge Voucher of LIC under varying circumstances ?

    This table shows who should sign the form of discharge in respect of a maturity claim under different circumstances:

    Circumstances Who should sign the Discharge Form
    Policy on own life which has not been assigned The life assured
    Joint Life policy which has not been assigned Both the lives assured
    Policy which has been conditionally assigned Both the assignor and the conditional assignee
    Policy which has been absolutely assigned The absolute assignee

    How can you stay protected with LIC policies if the key person important to your business dies ?

    Every business organisation has a few key members who are vital towards its functioning and its success. Key people are not necessarily among the top management, which runs the company but even high-performing salesmen or production engineers or administrative heads.
    In case of the death of one of these individuals, the organisation will suffer a definitely monetary loss in terms of its financial performance as well its creditworthiness. The loss will take some time to recoup before others can be trained and inducted to take their place. Besides the time and money invested in the training can make it an unnecessarily expensive proposition.
    If the firm opts to take life insurance policies like the Keyman insurance policy on the lives of such individuals, it would definitely protect the firm from any loss of profits or earnings that would result from the death of any of its key employees. The chaos that might result subsequent to the death of the firm's key employees will also require the expert services and consultations with legal luminaries and experts before the situation can be rectified. Needless to say, lump sum payments for services rendered are not an attractive option considering the fact that a bulk of such payments would be classified as taxes for the receiving individual.
    It is advantageous for the firm to buy an Immediate Annuity policy or a Deferred Annuity policy that will provide payment through fixed timely amounts over a number of years. Thus the tax assessment for the outside expert will be charged over a longer period of time instead of the total amount in one and the same year.

  • What procedure should one follow to obtain a duplicate copy if the original LIC policy is lost ?

    In case, a policy document is irrecoverably lost, destroyed or damaged, you can obtain a simple copy of the policy by making the payment of Re.1/- only to LIC. Such a copy will serve the purpose of your obtaining details of the data pertaining to a lost policy, such as the sum assured, the insurance plan, date of maturity, etc. When the policy matures, the claim amount can be obtained on the basis of an indemnity bond. Similarly, you can also surrender a policy even if the original policy document has been lost.
    However, if you need a loan against your policy, then a proper duplicate policy is necessary against the one that has been lost.

    How should one notify LIC in the change in address?

    Whenever you shift from one place to another, make sure to notify the change in your address to the relevant office, branch office, which directs your policy so that all your premium notices, receipts, etc will be sent to your new address.

    On the other hand, transferring of policies creates a lot of confusion and dislocation within the insurer's offices. Your best bet is to let it remain at a branch office where your agent resides so that in case of any difficulty, his services can be utilised without having to bother yourself unnecessarily.

    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 ?

    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 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 an asset management company (AMC) ?

    The trustee delegates the task of floating schemes and managing the collected money to a company of professionals, usually experts who are known for smart stock picks. This is an asset management company (AMC). AMC charges a fee for the services it renders to the MF trust. Thus the AMC acts as the investment manager of the trust under the broad supervision and direction of the trustees. The AMC must have a net worth of at least Rs10 crores at all times and it can not act as a trustee of any other mutual fund.

    What is the difference between mutual funds and portfolio management services (PMS) ?

    While the concept remains the same of collecting money from investors, pooling them and investing the funds, the target investors are different. In the case of portfolio management the target investors are high networth investors, while in the case of mutual funds the target investors include the retail investors. Further, in case of PMS the investments of each investor are managed separately, while in the case of MFs the funds collected under a scheme are pooled and the returns are distributed in the same proportion, in which the investments are made by the investors/ unit holders. Moreover, the investments of the PMS are managed taking the risk profile of individuals into account. In mutual fund, the risk is pooled depending on the objective of a scheme.

    Who is a custodian ?

    The custodian, an independent organisation, has the physical possession of all securities purchased by the mutual fund, and undertakes responsibility for its handling and safekeeping. For instance, the Stock Holding Corporation of India Ltd. (SCHIL) is the custodian for most fund houses in the country.

  • Bonds

    Who can invest in the RBI Relief Bonds ?

    The following can invest in RBI Bonds:

    * An individual in his or her name or on behalf of a minor, or jointly with one or more individuals.
    * A Hindu Undivided Family.
    * A Non-Resident Indian (without the right of repatriation of principal).
    * Government Promissory Notes can also be issued on anyone or survivor basis.
    * Bonds can be held by a minor with one or more major individual/s (including a minor).

    What is the minimum and maximum investment limit for RBI Bonds ?

    There is no maximum limit for investment in the bonds. Application must be in multiples of Rs.1000/- subject to a minimum of Rs.1000/-.

    What is the issue price of RBI Bonds ?

    The bonds will be issued at par. The bonds will be issued for a minimum amount of Rs.1,000/- (face value) and in multiples thereof. Accordingly, the issue price will be Rs. 1,000/- for every 1 bond.

    What will be the date of issue of RBI Bonds ?

    The date of issue of the bonds in the form of Promissory Note/Bond Ledger Account will be the date of receipt of subscription in cash or the date of tender of draft or the date of realisation of the cheque as the case may be.

    What will be the period of holding for RBI Bonds ?

    The period of holding of bonds is five years from the date of issue. The bonds shall be repayable on the expiration of 5 years from the date of their issue.

  • Loans

    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.
    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.
    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!
    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 for my loan ?

    No, that's the best part about personal loans! No collaterals, 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 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.

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