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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products

Mr. Sanjay Mehta holds a traditional policy and wants to stop paying premiums after paying for 5 years of a 15-year premium term, but keep some cover without further payment. Which option should the adviser describe?

The adviser should describe conversion to a paid-up policy. The policy continues with a reduced sum assured, in proportion to premiums paid against premiums payable, and no further premiums are payable. Revival needs arrears, loans carry interest, and there is no full premium refund.

  1. AConvert the policy to a paid-up policy, where the sum assured is reduced proportionately and no further premiums are dueCorrect
  2. BRevive the policy with the original sum assured at no cost
  3. CTake a policy loan to pay premiums indefinitely at zero interest
  4. DAssign the policy to the insurer for full refund of premiums

Explanation

Once a policy has acquired surrender or paid-up value, the holder can make it paid-up. The sum assured reduces in proportion to premiums paid over premiums payable, and no further premiums are due. Revival requires paying arrears, loans carry interest, and assignment to the insurer gives no full refund.

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