What is insurance and how does it work?

 Rahul is super confused about all the jargons that are thrown on him whenever he reads insurance; Rahul avoided insurance, but then with his first job came his first car and then the company offered him Health insurance as a part of his package and Rahul had a Motor insurance and also a Health Insurance but didn’t know the importance of them. Unfortunately, he met with an accident and his car was damaged and Rahul had a minor injury. At this point of time, the 2 sheets of paper took care of his expenses!!  This experience was an eye-opener and he decided to meet his college buddy Rohan who had got a job in one of the Top Financial company as a wealth manager. Below is the conversation they had.

Rahul:- Hey Buddy please simplify and tell me “What is insurance and how does it work?”

Rohan:

It’s very simple Rohan – You just get overwhelmed with the terms – let me explain you.

Insurance is a policy taken to cover the risk of financial loss, i.e. it provides protection against financial loss that may occur. In your case, it was financial loss due to damage of your car which was covered because you had an insurance policy.

However such loss may be due to death of the insured, damage to a property, liabilities or expenses incurred in car accident, etc. The entity from which insurance is taken is known as the insurance company or an insurance company.

The person who buys the insurance is known as the insured or policyholder. You have to pay a fee to the insurance company to subscribe for the insurance; such fee is known as an insurance premium. Insurance premium is the financial cost payable in instalments or in lump sum for obtaining an insurance cover. You must pay the premium at pre-defined intervals. Non- payment of premium results in cancellation of insurance policy.

To purchase an insurance policy, you have to subscribe for insurance by paying premium at the prescribed intervals. On subscription, you receive a contract or an insurance policy document that you get from the insurance company which contains the terms and conditions subject to which financial loss you suffer will be compensated. In case any loss is suffered by you, you need to claim along with the required documents to the insurance company. The insurance company after conducting an investigation and on being satisfied with the loss approves the claim. Once the claim is approved, you receive the compensation & you are paid for the damage you have claimed.

Insurance can be broadly classified into two categories, Life insurance and general insurance. As per IRDA(Insurance Regulatory Development Authority of India), as on March 31, 2016 the share of life insurance business in India is 79% and that of general or non-life insurance is 21%. There are 54 insurance companies operating in India of which 24 are life insurance companies, 24 are general insurance companies and 5 are health insurance companies exclusively doing health insurance business. The insurance company, in order to reduce the risk undertaken can also sell the insurance further to other insurance companies, this is known as reinsurance. As of now GIC(General Insurance Corperation of India) is the only reinsurance company in India.

Also check out our video to understand insurance in a simple way

Life Insurance: Life insurance is a policy taken on the life of the insured. In this case, the insurance company agrees to pay a guaranteed sum of money to the beneficiary in case of death of policy holder in return for the premiums paid by the policy holder. The premium may be paid in lump sum or installments.

Read more about Life insurance policy in India – How it works?

Read more about Common terms in life insurance insurance policy

General Insurance: All insurances other than life insurance are known as general insurance including property insurance, motor insurance, etc. Following are the various types of general insurance:

Motor Insurance: Motor insurance is the policy taken by the car owner to mitigate the financial risk involved while operating the car. In case the car meets with an accident, damaged or is stolen, the loss borne by the owner is compensated by the insurance company depending upon the coverage of insurance policy. Car insurance in India is mandatory for all the vehicles whether they are for personal or commercial use. As per the provisions of The Motor Vehicles Act, 1988 all the vehicles, which are operating in public places should have a car insurance policy at least to cover third party liability as specified under the Act.

For example, in case of car insurance, if the car meets with an accident the losses suffered and the cost of repairs will be borne by the insurance company. The amount and extent of compensation depends on the features of the policy opted. In some car insurance cases only third party liability is covered whereas in other cost of repair of car is also covered.

Read more about Car insurance terminologies you should know

Read more about Anatomy of a car insurance plan

 Health Insurance: Health insurance is a policy that provides coverage of the medical and surgical cost of the individual. The insured pays premium towards the policy and in return the cost of medical expenses is born by the insurance company. The payment by insurance company is either paid directly to the hospital/service provider or the insured has to pay the expenses out of pocket and then it is reimbursed by the insurance company. Payment type, i.e. cashless or reimbursement depends on the type of policy chosen.

For example, if an insured falls ill and is hospitalized, then the expenses incurred on hospitalization and treatment is borne by the insurance company.

Also check out our video to understand health insurance in details

Travel Insurance: Travel insurance is a policy that provides coverage for the losses incurred while travelling, within the country or internationally. It covers losses incurred due to loss or theft of baggage, loss of important documents, cost incurred due to trip cancellations, medical expenses, etc. Travel insurance policy can be of 2 types, single trip and multi – trip. As the name suggests, a single trip policy is meant for a single trip, it can be taken at the time of booking the trip and it provides the coverage only for the exact duration of the trip. A multi-trip policy is designed for frequent flyers; it covers multiple trips during the coverage period usually a year.

For example, if on a trekking trip the insured suffers from a serious injury in such case the travel insurance company ensures medical treatment. Travel insurance in such case becomes more relevant as some of medical insurance policies are not applicable outside the coverage area.

 Home Insurance: Home insurance, also known as homeowner’s insurance is a policy that provides coverage for the individual’s home against damage. It covers the loss incurred due to damage of the house due to natural or man-made disasters such as earthquake, fire, lightening, riots, etc. The damage may be to the structure or the contents of the house.

For example, in case the ceiling or flooring of the house is damaged due to leakage in pipeline the cost of such loss is borne by the insurance company.

Read more about An anatomy of an health insurance plan

Read more about How to choose an health insurance plan

Marine Insurance: Marine insurance is a policy that provides coverage for the damage of cargo, ships, or any other transport through which cargo is transferred. It is of two types, cargo insurance and hull insurance. Cargo insurance provides coverage against the losses that may incur during the transit of goods while they are being transported from one place to another. Such transportation may be via road, rail, sea or air. Hull insurance provides coverage for the damage of vessel or aircraft.

For example in case if the goods (value being INR 10 lakhs) being transported is damaged during transit. However, the extent of damage is INR 7 lakhs then such loss of 7 lakhs shall be borne by the insurance company.

Commercial Insurance: Commercial insurance is a policy that provides for any unforeseen event that may hamper the normal working of business. It may be due to property damage, theft, injured employees, etc.

For example, certain commercial insurance policies provide coverage on the liability arising out of lawsuits, judgments or settlements.

Though insurance comes with a cost in the form of insurance premium and as optimistic individuals we all believe that nothing can go wrong with us. However, there is always a risk that can never be avoided. Also, it provides a peace of mind to the insured. For example in case of life insurance, though the loss to the family of insured can never be compensated but an insurance policy ensures some financial support in the absence of an earning member. Thus, insurance aims at safeguarding the interest of people from uncertainty by providing the certainty of financial support.

Know about other general insurance in our video below

Read more about Should one buy health insurance or life insurance or both and when?

Read more about Did you know thest taxation facts about your insurance polcy?

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Buying a two-wheeler for the first time? Know about two-wheeler insurance policy

A teenager stepping into adulthood covets the trendy two-wheeler for its speed and style statement. On the other hand, an office-going middle-aged man buys a two-wheeler for ease of conveyance. A housewife on the contrary considers buying a scooty for the daily household chores of buying groceries or picking and dropping her children to school. Whatever be the reason, a two-wheeler is a favored mode of transport for young and old and males and females alike.

When you buy a new two-wheeler, you look deeply into the MMV (Make, Model, Variant) of the vehicle, its cost, mileage and also the reviews. But, do you pay any attention to the insurance policy associated with it? The Motor Vehicles Act, 1988, has mandated every vehicle on Indian roads to have a valid insurance cover. Therefore, like it or not, if you are buying a two-wheeler you would also have to buy a two-wheeler insurance cover.

Read more about Why you should get your two wheeler insured

Do you know the important aspects of such an insurance cover? If not you should. So, here are some important and rudimentary features of your two-wheeler insurance policy that you should know:

The type of plan

There are two types of two-wheeler insurance plans available in the market – third party liability only plans and comprehensive plans. Third party plans are mandated by the Motor Vehicles Act. These plans cover financial liabilities against third parties for any damage or bodily injury caused by your two-wheeler. Comprehensive plans, on the other hand, cover third-party liability as well as damages faced by you and your bike. So, in case of an accident, any cost of repairing your bike is also paid by comprehensive plans. As such, comprehensive insurance plans score over liability only policies which have a limited coverage.

Read more Everything you should know about two wheeler insurance policies in India

Tenure

Thanks to the new IRDAI regulations, two-wheeler insurance policies are now being offered for a longer tenure. While earlier the policies had a one-year coverage period, with the change in regulations you can avail coverage for 2 or 3 years at a stretch. Long-term two-wheeler plans are better as they eliminate the hassle of annual renewals and save on the premium costs too.

Add-ons

Add-ons are additional coverage features which are available with comprehensive two-wheeler insurance policies. You have to pay an additional premium for availing any add-on cover you want. The additional premium is very low while the coverage is very helpful. Some important add-ons which you can consider include roadside assistance cover, zero depreciation cover, passenger cover, etc.

NCB Discounts

Every year when you don’t make a claim in your two-wheeler insurance policy you get a reward in the form of No Claim Bonus (NCB). This NCB discounts the premium which you are required to pay when you renew your policy. Moreover, the NCB discount is cumulative in nature. The rate of discount increases every successive year in which no claim is raised. In fact, you can claim a maximum discount of 50% on your renewal premium by accumulating your NCB discount for 5 or more consecutive claim-free years. Know your NCB discounts and save money.

Read more about how to earn no claim bonus with zero claims

Making a claim

What use is your two-wheeler insurance policy when it doesn’t come to your rescue in the time of claim? Making a claim in your two-wheeler insurance policy is a simple process. However, there are some steps which you are required to follow correctly to get your claim settled. For instance, the very first step in making a claim is informing the insurer. After that, a survey is done of the damages before repair works start. Only if the steps are followed correctly would you be able to get your claim settled easily. So, know the claim settlement process of your insurance policy beforehand so that when crisis strikes you would know exactly how to handle it.

Renewals

Whether you buy a one-year insurance cover or a multi-year cover, renewals are essential as long as you own your bike. When it comes to renewals many of you either ignore it or forget about it and the policy lapses. A lapse in your bike insurance has serious consequences. Firstly you violate the law of having your vehicle insured. If caught without insurance you would face heavy penalties. Secondly, you take the financial risk of any damages on your head. Thirdly, renewing a lapsed policy requires inspection done by the insurance company. This inspection takes time and might increase your premium outgo. Lastly, if not renewed within 90 days of lapse, you lose your entire accumulated NCB discount. So, timely renewals are important.

Know how to renew your lapsed policy

Be conversant with these important factors of your bike insurance policy and enjoy a smooth ride on your new two-wheeler. Your insurance policy would take care of any contingencies if they arise.

Here are some cool bikes for you to consider

 

Tips to take care of your health during and after Diwali

Diwali is just around the corner and we are all busy making preparations. Houses are being cleaned vigorously, shopping is on for new clothes, redecorations are underway and delicious aromas from the kitchens fill your noses. Isn’t Diwali one of the most-awaited festivals?

Though we all celebrate Diwali with much pomp and splendour, one cannot deny the ill-effects the festival has on the environment. These environmental ill-effects cause harm to our health too. Moreover, there are other health hazards which become common during Diwali like burns, colds, dengue, etc. Do you know how to tackle these possible health hazards?

Many don’t. So, here are the possible ill-effects of the much-loved festival and ways to tackle each –

Air pollution

This one is a no-brainer. Firecrackers contain a lot of harmful pollutants and bursting them causes tremendous amounts of air pollution. In fact, last year’s Diwali celebrations took a toll on New Delhi’s air when the PM2.5 volume (an indicator for air pollution)was reported to be more than 600 units against the permissible limit of 60 (Source: http://zeenews.india.com/environment/even-in-worst-case-scenario-repetition-of-diwali-2016-pollution-unlikely-safar-2050581.html ). Air pollution causes respiratory disorders and so you should be careful. You should use air purifiers in your homes and invest in face masks which cover your nose and mouth from harmful pollutants in the air.

Noise pollution

Though the sale of high-pitched firecrackers has been restricted, people find a way to burst noisy crackers. These crackers cause sound pollution which is bad for our ears and overall mental health. To protect against sound pollution you should use earplugs.

Low visibility for cars

When the air has heavily polluted a layer of smog covers the air. Smog is opaque and makes visibility a concern when driving. This increases the possibility of road accidents. You should be careful when driving in smog-like conditions. Use defoggers for proper illumination and headlights are a must irrespective of day or night. Also, speed should be avoided and you should drive slowly.

Dengue from outdoor activities

Most part of Diwali is celebrated outdoors in bursting crackers and visiting relatives. This makes you prone to mosquito bites resulting in dengue and malaria. You should, thus, use mosquito repellants when stepping out of the house. There are mosquito repellant creams, patches and also roll-ons which keep mosquitoes at bay. Invest in them. In your home too you should use mosquito repellant sprays and machines.

Sudden colds

This is the season when the weather changes. This change in weather causes colds and coughs very easily. So, you should try layered clothing to protect against possible cold. Also, don’t indulge in too many cold drinks or frozen desserts in your festivities.

Burns

The most common and frequent problem associated with Diwali is burns. Not being careful when bursting crackers or due to accidents, many individuals get burned. Try and be careful. Always burst firecrackers with safety and care. Try and wear cotton clothes which do not catch fire easily.

Where does insurance fit into these contingencies?

Insurance is a saviour in case of emergencies and, believe it or not, it finds relevance even in the above-mentioned ill-effects post-Diwali. Let’s see how –

Health insurance

Given the very high probability of health hazards during Diwali, it is no wonder that health insurance proves useful. An OPD cover in your health plan is tremendously useful for those burns and cold. If you seek treatment for respiratory disorders due to air pollution you can avail cashless treatments through a health insurance policy. If you have invested in a Dengue health plan, you can be relieved of the financial implications if you happen to contract dengue. The plan would pay for all the expenses incurred in treatments. So, a health insurance policy is very important.

Car insurance

The problem of low visibility due to smog and air pollution results in accidents. In case you cause injury to others or damage your own car, a comprehensive car insurance policy would pay for the damages caused as well as sustained by you. Since insurance is mandatory try and buy a comprehensive car insurance policy for a wider scope of cover.

Diwali, though a time to be merry, has various health hazards. You should be as eager to protect from these hazards as you are to celebrate Diwali. Know the possible dangers and how to deal with them. Invest in a good health insurance and car insurance plan to take care of the financial strain of these hazards. So, make the most out of your Diwali celebrations but keep an eye out for these hazards.

Read also An anatomy of an health insurance plan

Read more about Dejargonizing health insurance terms

Read more about Anatomy of a car insurance plan

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What to do when your two-wheeler meets with an accident?

Accidents are uncertain. No matter how careful you are accidents happen when you least expect them to. When you own a two-wheeler, the chances of accidents are more. Needless to say, accidents incur expenses. Expenses for repairing the damaged bike or for any injury suffered by you or for any injury caused to a third party. The list is long and the expenses are substantial.

Thankfully, the motor vehicle insurance law mandates vehicles to have a compulsory two-wheeler insurance cover. If you buy a comprehensive two-wheeler insurance cover, the various expenses associated with an accident are taken care of. However, the problem arises when you are not conversant with the claim process. Though the insurance company promises to shoulder your accident-related expenses, they require you to follow some steps for making a claim. Do you know these steps?

Most of you might not. That is why here is what to do when your two-wheeler meets with an accident:

Inform your insurer

The first and the foremost step, after meeting with an accident, is to inform your insurance company. This is the first step in raising your two-wheeler insurance claim. The insurance company requires you to raise a claim as soon as you face an accident. In case of minor accidents, the company guides you towards the next steps which should be taken. But, if you face a major accident removing your two-wheeler away from the accident scene or getting the repairs done without informing the insurer jeopardizes your claim process. The insurance company arranges for a survey at the accident scene for assessing damages which are not tampered with. Only after the survey the claim gets registered. This survey of untampered damage is possible only if the insurer is informed immediately. So, whether it is minor or major, call up your insurance company as soon as you face an accident and provide the required details.

Get your bike surveyed

As stated earlier, the insurer gets the damaged surveyed by its surveyor. In case of a minor damage, the insurance company might direct you to take your bike to the nearest authorized workshop. The insurer’s surveyor then visits the workshop and surveys the damages suffered. In case of a major accident, the surveyor, usually, makes a site visit and surveys the damages. This survey is important because the damages assessed and reported by the surveyor would be considered valid by the insurer in assessing the amount of claim to be paid. You would be guided on the surveyor’s visit once you inform the insurer.

Complete the repairing process

After the survey is done, repairs start. The repairing work might take time depending on the damage suffered by your two-wheeler. You would have to wait out the repairing period before taking the next step towards your claim settlement process.

Claim filing

The last step is filing your claim with the insurance company. This is done once your two-wheeler is repaired. The insurance company has a claim settlement form which you need to fill and submit. As survey has been done, the insurer knows the repair cost estimate. Still, you are required to submit all your repair-related bills in original along with the claim form. If you have sought services from a preferred workshop the insurance company would settle the repair costs directly with the workshop. If on the other hand, you have gotten your two-wheeler repaired at an unauthorized workshop you would have to pay the repair expenses yourself, file your claim, submit the relevant bills and get the claim reimbursed.

Check for your out-of-pocket expenses

Whether your claim is cashless or through reimbursement, you might not get the complete cost of repairs in claim settlement. There are some deductions which lower your claim amount. For instance, there is a compulsory deductible which is paid from your pocket in every claim. Similarly, the insurer factors in depreciation of the parts which have been repaired or replaced. As such, the claim is, usually, lower than the actual repair cost. So, you should check for such out-of-pocket expenses when you are raising your claim.

Making a claim in your two-wheeler insurance policy is not difficult once you know what to do. Though accidents are uncertain and emergent, if you know how to tackle with your insurance claim you can at least face the financial implications. So, know these steps, make a valid claim and get your claim settled easily and quickly.

Read more on why you should insure your bike

Know Two Wheeler insurance plans add ons

Zipping across the town in your two-wheeler is a fun thing to do especially when the weather turns grey. Crisscrossing through the maze-like traffic in your two-wheeler is a blessing when you are getting late for office. Two different scenarios, two different moods and yet one common denominator, a two-wheeler! A two-wheeler has become an essential thing whether for fun or for convenience. Along with a two-wheeler comes a two-wheeler insurance policy. Thanks to the Motor Vehicles Act, 1988, you cannot escape from a two-wheeler insurance plan if you have a two-wheeler. The plan is mandatory.

A comprehensive two-wheeler insurance plan protects you against financial liabilities in case of accidental damages faced by you, your bike or any third party and property. What if I told you that your insurance plan could give you additional coverage too?

Yes, you heard me right. Add-ons are available in insurance plans which, when opted, increase the scope of coverage. You have to pay a marginally additional premium and opt for these add-ons. Once added, these add-ons help you in times of crisis. Want to know what these add-ons are and what they do?

Let’s study the popular add-ons which are available with two-wheeler insurance plans

Roadside assistance cover

Imagine what would happen when your bike breaks down in the middle of a desolate road with no help in sight! Who would you contact for help?

Roadside assistance is an add-on cover which gives help in these scenarios. If your bike breaks down in the middle of the road, this cover gives assistance in towing, change of flat tyre, refueling, arranging for a mechanic’s service, etc.

Zero depreciation cover

As soon as the bike is out of the showroom, its value falls due to depreciation. The fiber, nylon or rubber parts of your bike depreciate with use. As such, in case of a claim, the depreciated value of the parts replaced is paid. A zero depreciation cover protects against the effects of depreciation. With this cover you can claim the actual cost of the parts replaced without factoring in depreciation. Thus, this cover proves very beneficial in increasing the value of your claim.

Passenger cover

Most two-wheeler insurance policies provide personal accident cover for the owner/driver. What about the pillion rider? What if the passenger faces an accident? Passenger cover add-on covers the pillion rider too against accidental disabilities and death. An additional benefit is paid under the rider if the pillion rider faces death or disability due to an accident.

Read more about What to do when your two-wheeler meets with an accident

Medical cover

This cover comes in handy in meeting the medical expenses incurred due to a bike accident. In case of an accident, if you are hospitalized, you incur huge medical bills. These medical bills are taken care of by the medical cover add-on. Any medical expense necessitated by an accident involving the two-wheeler is covered under this add-on.Its recommended you have an health insurance cover.

Read more about why a health insurance cover is an absolute necessity

Accessories cover

So, you are a fashion icon who loves to accessorize your bike with high-end electrical and non-electrical accessories. What if such accessories are damaged in an accident? Would you get a claim for them in your basic two-wheeler insurance policy? Usually, you won’t. But, you can if you opt for accessories cover add-on. This add-on covers the cost of repairing or replacing the electrical and non-electrical accessories of your bike.

These were the basic add-on covers which are found with two-wheeler insurance policies. But, given the additional premium payable, are they useful?

Of course they are! If you don’t believe me, here’s why:

  • Add-ons increase the scope of coverage. Thus, you can get a higher claim amount in case of any damage or loss.
  • Zero depreciation cover is very essential as it protects your pockets against the brunt of heavy depreciation on your bike’s spare parts.
  • Roadside assistance cover gives you round-the-clock assistance in case of a break-down. This ensures that you wouldn’t be stranded without help.

Just as you two-wheeler is important to you, the add-on covers are also important for a complete insurance experience. By paying a fractionally higher premium you can enjoy higher benefits. So, find out about the add-on covers available in the market the next time you buy or renew a two-wheeler insurance plan. The online marketplace lets you compare. Compare and select the add-ons which you think would be suitable for your requirement.

Read more about Why choosing the right policy can make your life worry free.

Read more about What does your two wheeler say about you?

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