7 Frequently asked Life Insurance Questions and Answers

insurance questions and answers

My friend Vinay was in the process of buying a life insurance policy. Even after reading online materials on life insurance, he was still confused. Some of the insurance questions that were nagging him were

1. Should I buy a term insurance policy or traditional endowment policy?

2. Are offline insurance policies more reliable than online insurance plans?

3. What should I do, if I want to surrender my insurance policy?

4. What if I become a smoker within the tenure of the insurance policy?

5. Are ULIP plans same as NAV guaranteed plans?

6. Is it really possible to buy a Rs. 1 Crore sum assured term plan or even more with my salary limitations?

7. What if I am not the nominee of a life insurance policy, Can I still get a claim?

Insurance is essential to cover your family dependents in case of your untimely death which leads to your long term financial goals like child education and child marriage remaining un-achieved.

I am sure your mind would be full of such questions if you are planning to buy insurance or if you have such insurance policy in your portfolio. In this article, I will present the same advice I gave Vinay about his life insurance questions and answers for the same. This may help you to choose the right insurance product and get the insurance claim in a timely manner

Frequently asked Life insurance questions and answers

Below are some frequently asked life insurance questions and answers. These are some of the same queries that Vinay also had.

Question 1. I want to buy life insurance. How do I select between a term insurance plan and an endowment plan?

Financial planners always advise not to mix insurance with investments. Endowment policies are a mix of investments and insurance where as term insurance plans are purely insurance products. Traditional Endowment insurance policies are much expensive in nature vis-a-vis term insurance plans.

Example: Assume the policyholder Vinay’s age to be 35 and the premium paying term to be of 25 years. By paying a premium of Rs 9000 under term insurance policy, Vinay will get a life cover of 35-40 lakhs.

But with an endowment policy, Vinay being aged 35 years and other things remaining same, he will get a life cover of only 2 Lakhs.

One is advised to buy a term plan and pay low premiums and utilise the rest of the amount by investing in balanced funds or equity funds. These alternate investments may yield 15% annualised returns and will increase their money 4 times in 10 years and 16 times in 20 years.

Simples answer is : Choose term insurance and not endowment policy

Question 2. Are online insurance plans reliable given the fact they are 40% cheaper than offline policy?

There is no difference in the base product in case of online and regular insurance policies expect the premium amount and the riders. All insurance products whether they are online term insurance plans or offline are approved by Insurance Regulatory & Development Authority in India (IRDA).

You should not have any preference or reservations regarding any insurance company as all of them are approved by IRDA. Just keep one thing in mind, you must fully disclose all relevant facts while buying online or offline insurance

Simple answer is: Choose an online term insurance plan as it is much cheaper comparatively

Question 3. What should I do, if I want to surrender my insurance policy?

In order to surrender an insurance policy, you can download the surrender form from the relevant insurance company website, sign it and try to visit the insurance company office in your nearby locality and deposit your surrender request over there.

In return, the insurance company will credit your bank account with the surrender value in the bank account which is provided there in the surrender application form. In addition to it, you should not forget to make the power of attorney for surrendering the insurance policy in the name of your legal heir.

The documents required in such a process would be your ID proof, passport size photograph, policy document and surrender application form and a cancelled cheque of your bank account

Simple answer is: Download a policy surrender form online, fill necessary details and visit insurance company with required documents

Question 4. What would happen if my smoking habits change after buying insurance?

Normally a life insurance policy term is 25-30 years and in such a long duration, a person may develop some bad habits like smoking or drinking liquor.

However in such circumstances, the policyholder must disclose this fact to the insurance company because the insurance company may increase your premium amount as your risk profile increases when you have developed the habit of smoking.

Generally such disclosures to the insurance company help in reducing your chances of insurance claim being rejected. Hence it is advisable for the policyholder to disclose all such diseases or habits which might have occurred after buying your insurance policy

Simple answer is: Be true to insurance company and disclose all changes to your health or habits if occurred during the span of the policy

Question 5. Are Unit linked Insurance Plans (ULIP) same as NAV guaranteed plans?

NAV guaranteed plans are a part of Unit linked Insurance Plans (ULIP). NAV guaranteed plans are special type of ULIPs which guarantee the investor with the highest NAV declared within intervals.

Under NAV guaranteed plans, it offers the highest NAV recorded during a fixed number of years within the tenure of the insurance policy. However it is advised to stay away from ULIPs or guaranteed NAV plans as there is high level of hidden costs involved in both the products

Simple answer is: NAV guaranteed plans are a part of ULIPs. Stay away from such plans

Question 6. Can I buy a term insurance plan with 1 Crore life cover under some conditions?

Yes, it is quite possible to buy a term insurance plan with Rs. 1 Crore as sum assured.

The insurance company would decide that on the basis of the

  • Reports generated under your medical tests and
  • Your current income salary must be in line with your life cover requirement,

Otherwise in some cases the insurance companies may reject your insurance purchase request

Simple answer is: Yes, you can get a life cover of Rs. 1 Crore, but your current salary must justify the amount of life cover

Question 7. What if I am not the nominee of a life insurance policy, Can I still get a claim?

Earlier, Vinay’s father had taken a life insurance policy. But Vinay’s uncle was made the nominee of the life insurance policy instead of Vinay. So Vinay was not the nominee, but the legal heir.

According to Section 39 of Insurance Act, it is not necessary for the nominee to be the legal heir of the policyholder. In such a case, the nominee is entitled to receive the insurance claim amount. But as per the Insurance Act, the nominee has to hold this amount in a trust for the dependents or legal heirs of the life assured.

Therefore under such circumstances, one of the legal heirs of the policyholder has to approach the insurance company to stop the payment of the insurance claim to the nominee. The nominee can also be sued under the legal affairs if the nominee tries to do something against the laws of insurance

Simple answer is: You can still get a claim if you are not the nominee, but the legal heir of the policyholder


Vinay was happy with the insurance questions and answers and relieved that his queries had been resolved. He was happy that he had enough information to make a purchase decision.

About the Author

Vaibhav Sangli is an MBA Finance who loves to write on several topics including insurance and mutual funds and finding out different ways to earn and spend money.

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