March 2021 - Turtlemint

Find out how many COVID claims Health Insurance paid this Pandemic

March 24, 2021March 24, 2021 Sidharth Hampanavar

The alleged second wave of the pandemic started in February-March 2021 as COVID cases started climbing even when the vaccination drive is in full force. Many States have seen a considerable hike in COVID positive cases which has prompted them to take serious actions to stop the spread of the infection. Even health insurance companies are reeling under the heavy claim burden brought on by increased COVID related claims.

Insurance companies reported receiving increasing COVID-related claims from July 2020. Have a look at the claim trajectory –

Source: Business Standard

As you can see, the number of claims started with 81,000 in July 2020 and climbed beyond 6.5 lakhs by December 2020. The total claim amount the companies settled during this period amounted to INR 9989.89 crores.

Talking about the current year, there has been a fresh surge in COVID cases and claims have started rising. As of 25th February 2021, companies have received more than 9 lakh claims related to COVID which amount to INR 13, 752.41 crores, as per GIC’s compiled data. Out of the claims that insurance companies have received, more than 7.6 lakh claims have been settled amounting to INR 7141.33 crores. This figure is close to 15% of the total health insurance premiums that the companies had collected till January 2021. The average claim settlement amounts to INR 93, 758.17 per claim.

Source: Business Standard

What so the insurance companies say?

Many insurance companies are stating that the number of claim settlements did not reduce despite the reduction in COVID cases towards the end of 2020. This is because many claims were reported on a reimbursement basis wherein the insurance companies need time to assess, analyse and settle the claims. So, even as COVID cases were declining in the last months of 2020, the claim settlements were not because of the payment of reimbursement claims. This is also the cause for the gap in the number of claims reported vis-à-vis the number of claims settled.

Impact on insurance companies

The high claim volume is distressing for companies as it impacts their profitability. With COVID specific health insurance plans becoming popular, insurance companies might face more claims if the COVID cases continue to rise despite the vaccination.

The true picture would become clear only after the pandemic subsides but for now, the high claim volumes are becoming a cause of concern for insurance companies. This might also convert to an increased premium in the coming years if the claim burden does not reduce.

Impact on policyholders

The claim experience of insurance companies does not affect you, the policyholder. In the case of genuine claims, insurance companies are bound to settle the claims within the prescribed time limits to avoid penal interests. So, if you suffer a COVID related claim, you would get a settlement for the claim if it is covered under your health insurance plan, whatever is the claim experience of the insurer.

However, if the premiums are revised, then you might feel a higher pocket pinch when you renew or buy a new health insurance plan.

The pandemic has been a rocky road for individuals and companies alike. Though it has resulted in higher claims, health insurance companies are also banking on the popularity and demand of health insurance plans, especially COVID insurance plans. A high claim volume is a short term phenomenon specific to the pandemic and as the pandemic subsides, things would settle down. Till then, insurance companies need to battle out the claims that they get.

How the Standardisation of Health Insurance Plans can lead to Increased Premium?

March 24, 2021March 24, 2021 Rupanjali Mitra Basu

The Insurance Regulatory and Development Authority of India (IRDAI) made several standardisations in health insurance plans. These standardisations were done with three main objectives –

To make health insurance plans easy to understand
To make health insurance plans comprehensive in their scope of coverage
To increase the penetration of health insurance in India

The first two objectives aimed to make health insurance more customer-friendly so that the coverage needs of individuals are duly fulfilled. The third objective was aimed to make health insurance an important part of everyone’s financial portfolios.

Though these standardisations have improved the benefit structure under health insurance plans, in many cases they have given rise to increased premiums. However, before analysing the reason for the increase in premium, here’s a quick look at the main standardisations that were implemented in health insurance plans –

Standardised policy wordings for common coverage benefits
Coverage for mental illnesses, modern treatments and robotic surgeries
Coverage for developmental ailments and learning difficulties, for example, dyslexia
Standardisation of free-look period across all plans, payment of penal interest if claim payment is delayed, clauses of portability and migration, grievance redressal and renewal
Complete disclosure of information by the insurance company
A standardised proportionate deductible clause in case of room rent limit
Coverage for telemedicine
Standardised Arogya Sanjeevani Policy

All these standardisations have made health insurance plans more exhaustive in their scope of coverage.

Reasons for the increase in premium

With these standardisations, health insurance premiums have undergone a change and have increased for many policyholders. Following are some of the reasons for such an increase –

Wider coverage
As insurance plans are offering a wider scope of coverage, the premiums for the policies have increased. If you buy a modern-day health plan or port to one, you would have to pay an additional premium for availing of a comprehensive scope of coverage where modern and robotic treatments and telemedicine are also covered.
Higher claim experience
Due to standardisations, health insurance plans have become more inclusive in their coverage. So, as new and advanced policies are being designed to include the standardisations mandated by the IRDAI, insurance companies face a higher probability of claims. So, to make the plans financially feasible and profitable, health insurers have to increase the premium rates.

How does it impact you?

As a customer, your premium outgo would increase as premiums are hiked across policies. However, you are also getting the benefit of wider coverage from the health plan. In fact, the scope of coverage far outweighs the marginal increase in premium that has been observed.

Moreover, since health insurance plans now allow instalment premiums, thanks to IRDAI’s directive, you can bear the premiums easily, without hurting your pockets. So, a wider scope of coverage with the facility of instalment premium is a win-win situation even if there is a premium hike.

Also, comparison across different health insurance plans has become easy with standardised terms and conditions and coverage benefits. You can, therefore, compare different plans on their coverage parameters and premium rates and choose the most comprehensive policy with the most reasonable rate of premium.

The bottom line

Under IRDAI’s regulation, health insurance plans would evolve further. The associated premiums might also undergo a change as health plans become more inclusive. Don’t be afraid of a premium hike because the coverage offered would have a higher value proposition compared to the hike. So, enjoy the modern-day health insurance plans with comprehensive features and get covered against unexpected medical emergencies on better terms.

Insuring your Car during the Pandemic? Ensure coverage against Fire, Theft and TP

March 24, 2021March 24, 2021 Sidharth Hampanavar

Work from home became a common phenomenon as the COVID pandemic resulted in lockdowns and social distancing. Even though the lockdown norms have eased up in many places, companies are still promoting the work from home model to ensure safety. Moreover, many individuals have cut down on socialising and lifestyle activities due to safety concerns. As such, the usage of cars has become minimal. Thus, when it comes to insuring the car, many of you might be thinking of going only for the third party cover since you are using the car minimally. But would the third party cover insure the car against other contingencies which might occur even when not in use?

The perils of theft and fire

Even when your car is parked, it is prone to theft and fire. According to data furnished by insurance companies, thefts of SUVs increased by 15% to 20% in the financial year 2019 compared to the last year. About 10, 000 SUVs were stolen in FY 2019. Moreover, out of 100 cars that companies insure, 1% to 2% of them are reported stolen. (Source: Economic Times). Guaranteeing the safety of your car against theft is, therefore, not possible.

Even if you live in a gated community with top-notch security, you can avoid the possibility of theft; but what about the possibility of fire? A short circuit or an electrical malfunctioning can lead to a fire that might damage your car considerably even when it is safely parked. Can you bear the financial loss in such cases?

Theft and fire are the major concerns of damage to a parked car when it is not in use. As such, mere third party coverage would not prove sufficient. You need coverage that would cover the resultant financial loss that you might suffer in case of either of the two perils.

The possible solution

To supplement your third party coverage, you can opt for independent theft and fire insurance plans. Both theft and fire insurance policies are offered by general insurance companies. While theft insurance, called burglary insurance would cover the loss suffered if your car is stolen, fire insurance would cover the loss suffered in case of fire-related damages.

You can buy all three policies independently, i.e. a third party policy, a burglary insurance policy and a fire insurance policy. These policies would secure your car against mandatory third party liability as well as possible theft and fire-related losses.

What if you can buy one single policy instead? Wouldn’t it be more convenient?

An alternative solution – comprehensive car insurance

There is another alternative which would eliminate the need of buying three distinct and independent covers – comprehensive car insurance.

A comprehensive car insurance policy not only covers the mandatory third party liability but also the losses suffered when your vehicle suffers any damage, including theft. So, even if the chances of road theft are eliminated when you don’t use your vehicle, you can get covered against theft and fire under a comprehensive plan. Here are the benefits that you can avail of –

A single policy to service with a comprehensive scope of protection
A single premium which might work out to be lower than the aggregate premium of three independent plans
Customization through the option of add-ons
Premium discounts for making no claims
Hassle-free purchase and renewals
Cashless repairs at networked garages

The bottom line

A comprehensive car insurance policy is, therefore, relevant even if you don’t use your car too often. Besides covering theft and fire, the policy would also provide coverage when you do use the car, however seldom it might be. So, don’t take any chances when it comes to insuring your car. Opt for a comprehensive coverage and get the most inclusive scope of coverage against possible damages.

How to get tax benefits beyond the 80C limit for Life Insurance Premium?

March 12, 2021February 25, 2022 Sidharth Hampanavar

Life insurance plans are known for their tax benefits apart from the financial protection that they provide. The premiums paid for the policy qualify as a tax-free deduction under Section 80C of the Income Tax Act, 1961. However, Section 80C allows various other investments and expenses as deductions and the maximum limit of deduction is INR 1.5 lakhs. For example, investment into an ELSS scheme, NSC, PPF, EPF, etc. also qualify for deduction under Section 80C. Thus, most often than not, you might end up exhausting the limit of INR 1.5 lakhs on other investments.

To provide you additional tax relief on your life insurance premiums, the Government has introduced an alternative avenue. In 2021, you can claim tax deduction on life insurance premium under the LTC scheme. Let’s understand what the scheme is all about and what tax benefit does it offer.

The LTC scheme

A Leave Travel Concession (LTC) is allowed to salaried employees as a part of their salary component. Under the LTC benefit, the expenses incurred on travelling can be claimed as a deduction from your taxable income. Thus, the LTC scheme provides tax benefits on travel related expenses.

What are the changes in the scheme?

Given the pandemic situation, many individuals did not take vacations or travel anywhere in 2020. Thus, salaried employees were not able to utilize the LTC benefit to reduce their tax liability. Considering this fact, the Government has allowed the LTC scheme to be widened to include other expenses for claiming tax benefits. If you buy goods and services, on which a GST of 12% or more is charged,

Life insurance premiums have been included under the purview of the LTC benefit and you can claim a deduction under the LTC scheme for premiums paid. In other words, life insurance premiums can be claimed as a tax-free deduction even under the LTC scheme if your 80C limit has been exhausted.

Details of the changed LTC scheme

Here are some conditions which should be fulfilled to claim tax benefit on life insurance premiums under the LTC scheme –

You should be a salaried employee and have the LTC component in your salary structure
A new life insurance policy should be bought between 12th October 2020 and 31st March 2021 to claim this benefit
If you are already claiming a deduction under Section 80C on the premium paid, deduction under LTC scheme would not be allowed
If, however, you have not claimed deduction under Section 80C on the premium paid, you can choose to claim under Section 80C or under the LTC scheme

Limit of deduction

If you are claiming the deduction for life insurance premium under the LTC scheme, the maximum limit of deduction would be up to the amount of LTC allowed by your employer. This means that the maximum LTC component of your salary would be allowed as the maximum limit of deduction. You can claim a deduction on the actual premium paid or the LTC amount allowed in your salary, whichever is lower.

The premium would include the premium inclusive of GST. Moreover, in case of single premium plans, you can claim deduction on the entire amount of premium paid while under regular premium plans, the deduction would be available only on the premium paid up to 31st March 2021.

The GST applicable on life insurance premiums depends on the type of policy that you buy. Thus, the amount of deduction that you can claim also varies depending on the policy type. Let’s understand with the help of an example.

Suppose you pay a premium of INR 50, 000, the deduction available would be as follows considering your LTC benefit amount is INR 1 lakh –

Type of life insurance policy	Premium amount	Applicable GST	Deduction that you can claim under the LTC scheme
Term insurance plan	INR 50,000	18% of the premium = INR 9000	INR 59,000
Unit Linked Insurance Plan	INR 50,000	GST is only levied on ULIP charges. Thus, no GST is charged on the premium	INR 50,000
Immediate annuity policy	INR 50,000	18% on 10% of the premium paid = INR 900	INR 50,900
Endowment or money back insurance plan	INR 50,000	18% on 25% on the first year premium = INR 2250	INR 52,250

Even though the LTC benefit is INR 1 lakh, the actual premium paid would be considered for claiming deduction. If, however, the LTC benefit would have been INR 50, 000, the maximum deduction available would have been limited to INR 50, 000 even if the premium is higher in some cases.

What it means for you?

If you are looking to save additional taxes this year, you can utilize the benefit of the LTC scheme to reduce your tax liability. You can use Section 80C to claim deductions for other types of investments and expenses while the deduction for life insurance premium can be availed under the LTC scheme. Thus, you get a higher scope of deduction which would help you bring down your tax liability considerably, especially when you are in the higher tax brackets.

This is a limited period offer which would expire at the end of this financial year. So, what are you waiting for? Buy a new life insurance policy and make the most of the scheme.

Are Women Optimally Insured under Health Insurance Plans?

March 5, 2021March 23, 2021 Ankita Sejpal

‘Men are from Mars, Women are from Venus’, a best-selling book by John Gray, an American psychologist, talked about the psychological differences between men and women. The title of the book, however, has become a catchphrase to highlight the differences between men and women as a whole.

Women are definitely different from men, both in terms of their psychological needs as well as physiological ones. Then why is it believed that a basic health plan would be suitable for women too?

Women’s anatomy is different from men. They are prone to specific illnesses or ailments which men don’t suffer. For example, women suffer pregnancy related complications, breast cancer, cancer of the reproductive system, degradation of bones resulting in osteoporosis, etc. As such, women need a comprehensive health insurance policy which specifically covers these women-centric illnesses. But is this what women get?

Trends in health insurance for women

When it comes to covering women under a health insurance plan, the answer is most commonly a family floater policy. The policy provides coverage to all family members, including women. Additionally, if women are employed, they might also have a group health scheme sponsored by their employers.

Though women enjoy coverage under group or family floater plans, such coverage might not be comprehensive enough to cover them against illnesses that they specifically suffer. For example, most group health plans do not cover maternity.

Health insurance for women – what women want?

For the woman of today, the following coverage benefits are a must –

Maternity
Critical illness
Other minor illnesses that they suffer
If a health insurance plan offers these coverage benefits, women can avail of quality healthcare facilities without worrying about affording the same.
So, for empowering women through health insurance, here’s what should be done –
Enhancing the coverage of an existing family floater plan
If there is a family floater policy that covers the women of the family, a review of the coverage is a must. You should check if the coverage is sufficient to provide an all-round coverage to women. The health insurance policy should be rejigged to provide coverage for the following –

Maternity related expenses and complications suffered during pregnancy if family planning is on the near horizon
Opting for a critical illness rider at the time of renewals
Enhancing the sum insured of the policy for optimal coverage
If your existing policy does not provide maternity and/or critical illness coverage, you can always port to another, more comprehensive plan. Ensure the sum insured is at least INR 10 lakhs and above so that the plan covers the medical bills optimally.

Buying a new comprehensive plan
If you do not have a health insurance plan altogether, buy a comprehensive coverage ASAP. Ensure the coverage has maternity cover, optimal sum insured and the critical illness rider. You can opt for an independent women-centric health plan or a family floater policy for covering the entire family.
Buying a standalone critical illness policy
If the critical illness rider is not available or if you want to opt for a comprehensive coverage against critical illnesses, a standalone critical illness policy would be better. You can opt for a women-specific critical illness policy that covers women-related illnesses like the different types of cancers, burns, etc. The policy has affordable premium allowing you to opt for an optimal coverage amount.
Buying a super top-up policy
An optimal sum insured is a must. This fact cannot be stressed enough especially if you look at the rising costs of medical treatments. So, whether you buy a family floater policy or an independent plan, choose a high sum insured. If affording the premium becomes a concern, go for super top-up health insurance plans. Super top-up plans help in increasing the coverage at very affordable premiums. Choose a deduction that matches the sum insured of the base policy. This way, claims up to the deductible would be covered by the base policy while claims exceeding the deductible would be covered by the super top-up plan.

Empowering women through health insurance – the road ahead

The healthcare needs of women require specialized coverage. If your normal health insurance policy is not equipped to provide the coverage that women need, it’s time for a change. Women are caregivers but they need care too. Empower women with a suitable health insurance policy that would take care of their medical needs. If you are a woman yourself, it’s time to take action. Invest in a suitable health insurance policy that provides an all-round coverage for your needs and take the next step towards financial empowerment.

ULIPs can now attract tax. Find out how

March 3, 2021March 23, 2021 Rupanjali Mitra Basu

Life insurance plans are a great tax saving tool. Besides providing financial security against the risk of premature death, life insurance plans allow you to save tax on the premium that you pay as well as earn tax-free benefits. Unit linked insurance plans provide investors with a good mix of investment returns, insurance coverage and tax-saving benefits. However, in the latest Union Budget 2021, the Finance Minister, Mrs. Nirmala Sitharaman, made ULIPs taxable in certain cases. Do you know the latest tax implication on ULIPs?

Before we jump to the new changes, let’s brush up on the existing tax benefits that ULIPs provided policyholders –

Tax benefit under Section 80C
Premiums paid towards ULIPs, except pension ULIPs, are allowed as a tax-free deduction under Section 80C of the Income Tax Act, 1961. The maximum deduction available under this Section is INR 1.5 lakhs.
Tax benefit under Section 80CCC
Premiums paid towards a deferred pension ULIP plan are allowed as a deduction under this Section. The limit is INR 1.5 lakhs that includes the limit under Section 80C as well.
Tax benefit under Section 10(10A)
On maturity of a deferred pension ULIP plan, you can withdraw up to 60% of the accumulated corpus in lump sum. Technically, this withdrawal is called the commutation of pension. Up to 33% of the withdrawn corpus is allowed as a tax-free benefit under this Section.
Tax benefit under Section 10(10D)
This section is relevant for maturity proceeds received from the ULIP plan. If the premium that you paid for the policy did not exceed 10% of the sum assured (20% for policies issued on or before 31st March 2012), the maturity proceeds would be tax-free.
Besides these benefits, partial withdrawals, premium redirections and switching are also tax-free under ULIPs.

What has changed?

A new provision has been introduced in the Union Budget 2021 regarding the taxation of ULIPs. As per the new rule, if the aggregate premium exceeds INR 2.5 lakhs, ULIPs would attract long term equity taxation. That means, if the returns earned from ULIPs exceed INR 1 lakh, the excess returns would be taxed @10% under Section 112A of the Income Tax Act, 1961. If the ULIP is held for less than 12 months, the returns earned would be considered a short-term capital gain and would be taxed @15%. That being said, since ULIPs have a lock-in period of five years, short term capital gains would become irrelevant.

Here are some important rules to remember with respect to the latest tax implication on ULIPs –

The new tax rule would be applicable on new plans that you buy on or after 1st February 2021. For existing unit linked plans, the rule would not be applicable and you can enjoy full tax benefits
If you invest in multiple unit linked plans, the aggregate premium of all the plans would be considered against the threshold limit of INR 2.5 lakhs
The death benefit would always be tax-free irrespective of the premium amount
The new tax rule would be applicable only on the maturity benefit
The tax benefit on premium would be allowed under Section 80C and 80CCC

So, the next time you are investing in ULIPs and you are paying a high premium, remember the new tax rules to assess your tax liability on maturity. Also, remember that your premiums would still be allowed as a deduction and so, you can invest in ULIPs for saving taxes on the amount you invest. Invest in ULIPs, despite the tax implication, because you can earn investment returns while at the same time enjoying insurance coverage, a benefit that is not available under other investment avenues.