Know About Group Life Insurance in India

Understand their benefits and details

Life insurance companies not only offer insurance solutions for individuals but also for groups. Group life insurance plans are offered by almost all life insurance companies. Group insurance plans cover a group of individuals under a single plan. Let’s understand the concept of group life insurance in details –

What is group life insurance?

Group life insurance is an insurance policy on the life of the members of recognized groups. A single policy is issued which covers all the members who are a part of the group which is being insured. Usually, term insurance plans are offered as group life insurance plans and so group insurance plans are also called group term plans.

Salient features of group life insurance plans

Group life insurance plans have the following unique features –

A single policy is issued in the name of the group which is called the Master Policy. This Master Policy includes the names of all group members and provides coverage to all.

  1. A minimum number of members are required to buy group life insurance plans. Usually, this number is 25 but different plans might have a different minimum requirement of members.
  2. The policy is issued for one year after which it can be renewed for continued coverage.
  3. The sum assured is calculated based on the age of the members or their annual incomes or their level in a hierarchy.
  4. The premium can be paid by the group, its members or partially by the group and partially by the members.
  5. No medical underwriting is usually done for each member of the group. The insurance company underwrites the whole group as one based on the group’s composition and nature.
  6. Every member who is a part of the group gets covered under the plan.
  7. The premium, sum assured and the number of members covered might change on renewal of the policy. This happens because, after a year, the number of members might have changed. Moreover, the age of the members also increases by one year and so the coverage has to be revised.
  8. Riders can be taken with the term insurance cover for additional protection. There are two riders which are usually available. They are –
    • Accidental death and disablement benefit rider which pays an additional sum assured in case of accidental death or disablement
    • Critical illness rider which covers specified critical illnesses and pays a lump sum if the insured suffers from any of the covered illnesses.

If any rider is selected, the premium amount would increase.

  • On renewal of the plan, if the claim experience of the group has been favourable, the insurance company offers discounts on the renewal premiums. A favourable claim experience means that the claim under the policy was low during the coverage year.

How do group life insurance plans work?

The following flowchart explains how group life insurance plans work –

flowchart

Groups eligible to buy group life insurance

Eligible groups that can buy group term insurance plans include the following –

  • Employer-employee groups
  • Banks and their accountholders
  • Clubs and their members
  • Associations and their members
  • Trade unions and their members
  • Financial institutions and their customers
  • Government and the citizen of India

Advantages of group life insurance schemes –

Group life insurance schemes provide various benefits to both the group and the group members. The benefits include the following –

  1. Group members can avail free life insurance coverage if the group is paying premiums for the group life insurance policy.
  2. The premiums of group life insurance plans are very low and affordable. In fact, the premiums prove to be lower than individual insurance plans making it easier to avail group life insurance.
  3. Since no medical underwriting is done separately for members of the group, coverage can be availed by members who are old or are otherwise unable to avail independent life insurance coverage for themselves.
  4. A group life insurance policy boosts morale among employees when their employer invests in an insurance plan on their lives. Employers can, therefore, benefit from increased morale and better employee retention.
  5. Group life insurance plans provide a lump sum benefit to the nominee of the covered member if the member dies during the policy tenure. This benefit helps the nominee deal with the financial loss suffered on the member’s death.
  6. Group life insurance plans also offer tax benefits. The employer can claim the premium paid as an admissible business expense under Section 37. If the employees are contributing towards their group life insurance premiums, the same can be claimed as a deduction under Section 80C up to INR 1.5 lakhs. Moreover, the death benefit received is also tax-free in the hands of the nominees.
  7. Every member joining the group gets the coverage of the group life insurance policy by virtue of his/her membership
  8. The coverage under group life insurance schemes is available worldwide. Even if the insured member dies in another country, the policy would cover the death and pay the death benefit.

Other types of group insurance plans:

There are other types of group insurance policies available in the market.

These include the following –

Types of group insurance plans Meaning
Group gratuity plans These plans cover the gratuity payable by the employer after the employee leaves service after completing 5 working years
Group superannuation plans These plans pay the pension payable to employees retiring from active employment
Group leave encashment plans These plans cover the liability payable by the employer when the employee encashes his/her accumulated leaves
Group health plans These plans provide health insurance coverage to the members of a group

Group life insurance plans are a good way to provide insurance cover to multiple members of the group under a single policy. If you are also a part of a group, look for the coverage available in your group to enjoy affordable coverage without hassles.

FAQs

  1. Is the sum assured restricted under group insurance plans?

Yes, the sum assured is restricted under group life insurance plans. The sum assured is usually determined by the insurance company based on the age, income or position of the member in the group.

  1. How are premiums for group life insurance plans paid?

Premiums under group life insurance plans are paid in one lump sum by the group administrator buying the policy.

  1. Can a member join the policy mid-way?

Yes, if a new member joins a group midway during the coverage tenure, the member can be added to the policy coverage by paying an additional prorated premium for adding the member.

  1. Can minors be covered under group life insurance plans?

No, minors cannot be covered under group life insurance plans. The minimum coverage age is 18 years.

How to interpret the medical claim settlement ratio for health insurance companies?

Health insurance policies have become the most essential part of everyone’s financial portfolios. Medical costs are rising unchecked and without a health insurance policy to pay for the bills, a medical contingency seems like a curse. When you have a health insurance policy you are assured of availing quality healthcare facilities as the policy promises to pay for the hospital bills which would incur. It, therefore, spares you the financial horror of a medical contingency and safeguards your savings.

There are various health insurance companies in the market which offer some of the best policies with comprehensive coverage benefits. However, it is important to judge the claim settlement history of the company. Though health insurance policies promise settlement of your medical bills, if the company does not pay the claim, the policy would not fulfil its promise. That is why the medical claim settlement ratio of the company is required to be checked.

The Insurance Regulatory and Development Authority of India (IRDAI) publishes the Incurred Claims Ratio of health insurance companies after the end of every financial year. This report shows the claims paid by the company against its premium earnings. Let’s understand the concept of Incurred Claims Ratio in details –

What is Incurred Claims Ratio?

Incurred Claims Ratio is the ratio of the total amount of claims paid by an insurance company against the total amount of premiums earned.

For example, if in a financial year the company settles claims of INR 5 crores and earns a premium of INR 8 crores, the Incurred Claims Ratio for that financial year would be [(5/8) * 100] = 62.5%

The formula for calculating the ratio is as follows –

Incurred Claims Ratio = (total amount of claims paid / total amount of premiums collected) * 100

Important aspects of the ratio

Here are some of the important features of Incurred Claims Ratio –

  • The ratio is expressed as a percentage. It can be below 100% or even more than that.
  • The ratio is calculated taking into consideration the number of claims paid and premiums collected in one financial year. So, if the ratio is for the financial year 2018-19, it would consider the claims paid and premiums collected between 1st April 2018 and 31st March 2019
  • The ratio uses the amount of claim paid vis-à-vis premium collected. It does not represent the number of policies for which the claim was paid.
  • The time taken in settling the claim is not considered in calculating the ratio

Interpreting the Incurred Claims Ratio

The Incurred Claims Ratio depicts the percentage of premium used by the insurance company to pay its claims. The ratio can, therefore, be depicted in the following ways –

  • If the ratio is more than 100%, it shows the company is paying more in claims compared to the premiums collected. This shows that the company is making a loss and might face a problem in paying future claims.
  • If the ratio is very low, i.e. between 20% and 50%, it shows that the company is earning high volumes of premiums but the claims are very less. This shows that the company is making too much profit. It might also show that the premiums charged by the company are very high which is resulting in a lower ratio. Alternatively, it might also show that the company has a very low claim experience.
  • If the ratio is between 60% and 90%, it shows that the company is in a comfortable position to pay its claims. The premiums are not very high and allow the company to generate profits for sustainability. In fact, the ratio in this range is considered to be a good indicator of the company’s solvency.

Medical Claim Settlement Ratio (CSR) & Incurred Claims Ratio (ICR) of Top #31 Health Insurance Companies

Here is a comparative analysis of Medical Claim Settlement Ratio & Incurred Claims Ratio of top 31 health insurers for the financial year 2018-19 –

Name of the insurer Incurred Claim Ratio (ICR)
Acko General Insurance Limited 24%
Aditya Birla Health Insurance Company Limited 59%
Apollo Munich Health Insurance Company Limited 63%
Bajaj Allianz General Insurance Company Limited 85%
Bharti AXA General Insurance Company Limited 89%
Cholamandalam MS General Insurance Company Limited 35%
Manipal Cigna Health Insurance Company Limited 62%
DHFL General Insurance Limited 46%
Edelweiss General Insurance Company Limited 115%
Future Generali India Insurance Company Limited 73%
Go Digit General Insurance Limited 11%
HDFC Ergo General Insurance Company Limited 62%
ICICI Lombard General Insurance Company Limited 76%
IFFCO Tokio General Insurance Company Limited 102%
Kotak Mahindra General Insurance Company Limited 47%
Liberty General Insurance Limited 82%
Magma HDI General Insurance Company Limited 90%
Max Bupa Health Insurance Company Limited 54%
National Insurance Company Limited 107.64%
Raheja QBE General Insurance Company Limited 33%
Reliance General Insurance Company Limited 94%
Religare Health Insurance Company Limited 55%
Royal Sundaram General Insurance Company Limited 61%
SBI General Insurance Company Limited 52%
Shriram General Insurance Company Limited 53%
Star Health & Allied Insurance Company Limited 63%
TATA AIG General Insurance Company Limited 78%
The New India Assurance Company Limited 103.74%
The Oriental Insurance Company Limited 108.80%
United India Insurance Company Limited 110.51%
Universal Sompo General Insurance Company Limited 92%

 (Source: IRDAI)

The top claim settlement ratio for health insurance companies are calculated by the companies themselves based on the annual reports published by the IRDA. IRDA, however, does not publish the best health insurance claim settlement ratios for general insurance companies. The claim settlement ratios are published for life insurance companies only. So, the Incurred Claims Ratio is the best ratio to judge the performance of health insurance companies.

Other important ratios:

Besides the Incurred Claims Ratio, here are some other important ratios which you should consider –

  • Claim rejection ratio – this ratio measures the percentage of claims rejected by the insurance company against the total claims made on it. The ratio is calculated as follows –

    Claim rejection ratio = (number of claims rejected / total claims made) * 100

    The ratio helps you check the history of claim rejection by an insurance company.

  • Pending claim ratio – this ratio shows the number of claims which are pending with the insurance company at the end of the financial year. The formula is as follows –

    Pending claim ratio = (number of claims pending / total claims made) * 100

  • Medical Claim settlement ratio– Claim settlement ratio of health insurance companies is an important ratio which is also advertised by health insurance companies. This ratio measures the numbers of claims settled by the insurer against the total number of claims made upon it. The calculation is done using the following formula –

    Medical Claim settlement ratio= (number of claims settled / total claims made) * 100

All these ratios give an insight into the efficacy of handling claims by the insurance company. As such, before buying a health insurance policy, these ratios should be checked.

Incurred Claims Ratio vis-à-vis Claim Settlement Ratio of health insurance companies

There is often confusion between the concepts of Incurred Claims Ratio and Claim Settlement Ratio of health insurance companies. Claim settlement ratio of health insurance companies is quite a popular concept which measures the number of claims settled by the insurance company. ICR, on the other hand, shows the financial capacity of the company to settle its claims. Other differences between ICR and CSR include the following –

Incurred Claim Ratio (ICR) Claim Settlement Ratio (CSR)
The ratio is calculated for general insurance companies The ratio is calculated for life insurance companies
The ratio uses monetary values of claims paid against premiums earned The ratio uses absolute values of the number of claims paid against the total number of claims made

Both these concepts are, therefore, different from one another. However, you should check both the ratios when finalising your health insurance policy.

Top health insurance companies in terms of Incurred Claim Ratio:

Here is a graph showing the top ten health insurance providers based on their ICR for the financial year 2017-18 –

graph

How to choose the best health insurance policy?

To choose the best health insurance policy, the incurred claims ratio or the best health insurance claim settlement ratio of the health insurance company should not be the sole parameter. You should judge the policies on the following parameters too –

  • The coverage offered – the wider the better
  • The premium charged – the lower the better
  • Sub-limits or limits on coverage features – as minimal as possible
  • Waiting period for pre-existing illnesses – the lower the better
  • Value-added benefits – the more the merrier


After comparing the plans on these parameters you should consider the ICR, best health insurance claim settlement ratio and other relevant ratios discussed above and then make your choice. When you make a well-researched choice of health plan, you would be rewarded with good coverage at affordable premiums. What’s more, your claims would also be settled quickly and smoothly. Isn’t that what you want?

Frequently Asked Questions

1. What is claim settlement ratio?

Claim settlement ratio is the percentage of claims settled by the insurance company against the total number of claims made against it. So, if an insurance company settles 95 out of 100 claims made on it in one financial year, its claim settlement ratio would be 95%.

2. What is claim ratio in health insurance?

Claim ratio in health insurance is equal to the claim settlement ratio of an insurance company. It shows the percentage of claims settled by the health insurance company against the total claims made on it in one financial year.

3. What is Incurred Claims Ratio?

Incurred Claims Ratio is the percentage of premiums used up in paying for claims in one financial year. The ratio is measured as the amount of claims paid in one year against the amount of premiums earned by the insurance company. So, if an insurance company earns INR 100 in premium and pays INR 75 in claims, the incurred claims ratio would be 75%.

4. What is difference between Incurred Claims Ratio & claim settlement ratio

Both these ratios measure different things. The claim settlement ratio (CSR) measures the number of claims settled by the insurance company against the total claims made. The incurred claims ratio (ICR), on the other hand, measures the amount of premium used to pay the claims. While the CSR shows the goodwill of the company in paying its claims, the ICR shows the financial standing of the company. The CSR can never be greater than 100% but the ICR can be. Moreover, a high CSR is desirable but a high ICR shows that the company is paying most of its premiums for claims and is a bad indicator of the company’s financial standing.

A complete list of all the different types of insurances available in India

Insurance is a risk management tool that promises compensation for the economic loss suffered by an individual in case of specific events. Insurance policies cover different types of risks and if such risks occur and cause a financial loss, the policies pay for the loss suffered. Insurance plans, therefore, provide financial security and should be an important part of your financial portfolio.

Nowadays, individuals have become increasingly aware of the importance of having an insurance plan to cover their financial risks. As such, they are investing in different types of insurance policies for their needs. Whether it is mandatory motor insurance plans or the essential term insurance or health insurance plans, the penetration of insurance is increasing in India. Before you also invest in a suitable insurance plan, you should first understand the different types of policies available and which policy covers which risks.

So, here is a brief overview of different types of insurance plans available in India –

Classification of insurance plans in India

Broadly, the classification of insurance plans can be done under two divisions – life insurance and general insurance. Life insurance covers human lives while general insurance covers financial assets and risky events. Both life and general insurance categories have different types of plans under them. Let’s understand these variants of life and general insurance policies in brief –

Life insurance

Here is a table containing the brief details of different types of life insurance plans –

Name of the plan

Term Plan

Meaning

These plans cover the risk of premature death.

  • If the insured dies during the term of the plan, the sum assured is paid. Term plans, usually have no maturity benefit.
  • However, in return of premium plans, the premiums paid are refunded if the insured survives till maturity

Salient Features

  • Allows you to opt for a high sum assured for maximum financial security
  • The coverage can be enhanced by adding riders
  • Premiums are extremely low

Benefits Payable

The sum assured is paid on death of the insured.

Variants available

There are four types of term plans –

  1. Level term plans where the coverage remains the same forever,
  2. Increasing term plans where the sum assured increases every year,
  3. Decreasing term plans where the sum assured decreases every year,
  4. TROP or Term Plan with the return of premium option which returns the premiums on maturity

Name of the plan

Whole life plan

Meaning

The plan usually matures when the insured attains 100 years of age.

  • It, therefore, covers the individual for his whole life
  • If the insured dies during the plan tenure, the death benefit is paid.

Salient Features

  • The plan runs for the lifetime of the insured
  • Premiums, however, are paid up to a limited period

Benefits Payable

The sum assured is paid on the death of the insured any time before attaining 100 years of age.

Name of the plan

Endowment Plan

Meaning

This plan is a savings-oriented insurance plan which not only provides coverage against premature death, it also creates a corpus for the policyholder at the end of the plan term.

Salient Features

  • Guaranteed benefits are paid under the plan
  • These plans might or might not earn bonuses
  • Guaranteed additions, loyalty additions, etc. are added to the plan benefit to enhance it

Benefits Payable

  • The sum assured is paid on the death of the insured during the policy tenure
  • If the policy matures, a maturity benefit is paid.

Variants available

Pure Endowment, Money Back Plan, Child Plan, etc.

Name of the plan

Money-Back Plan

Meaning

This plan creates guaranteed returns over the policy tenure, provides insurance coverage and also allows liquidity. The sum assured is paid in parts over the term of the policy at regular intervals.

Salient Features

  • Money-back benefits, called survival benefits, are paid at regular intervals during the policy term
  • The plan earns a bonus which is paid on maturity or death
  • The sum assured is paid in full irrespective of the money-back benefits paid.

Benefits Payable

Survival benefits are paid over the policy tenure

  • If the insured dies, the sum assured and bonus are paid.
  • If the policy matures, the remaining sum assured and bonus are paid.

Name of the plan

Child Plan

Meaning

These plans are designed to secure the financial future of the child even if the parent dies during the term of the policy.
Either the parent’s or the child’s life is insured in this plan.

Salient Features

  • The plan usually has an inbuilt premium waiver rider. This rider waives the premiums if the parent dies during the policy tenure.
  • The premiums are then paid by the insurer on behalf of the parent.
  • The plan runs till maturity whereupon the promised maturity benefit is paid.
  • The plan can be a traditional plan or offered as a unit-linked plan.

Benefits Payable

  • If the parent dies during the policy term, a death benefit is paid but the plan continues as per schedule.
  • If the plan is a money-back plan, survival benefits would be paid as and when they are due.
  • When the plan matures, the maturity benefit is paid.

Name of the plan

Unit Linked Insurance Plan

Meaning

These are market-linked plans where the premium is invested in market-linked funds. The returns, therefore, depend on market performance.

Salient Features

  • ULIPs promise investment returns and insurance coverage
  • The returns are not guaranteed
  • Partial withdrawals allow liquidity from the 5th policy year
  • The plan is flexible as you can switch between funds, pay additional premiums through top-ups and also opt for riders.

Benefits Payable

In case of death, the higher of the sum assured or the fund value is paid.
If the plan matures, the fund value is paid.

Name of the plan

Pension Plan

Meaning

These are retirement-oriented plans which create a regular income in the form of annuities. Annuities are paid throughout the insured’s lifetime thereby providing funds even in the older years.

Salient Features

  • There are two types of pension plans – deferred pension plans and immediate annuity plans
  • The amount of annuity is chosen as per the annuity option available
  • Under deferred pension plans premiums can be paid over the policy tenure to accumulate a corpus

Benefits Payable

Under deferred annuity plans,

  • If the insured dies during the policy tenure, a death benefit is paid.
  • After the plan matures, 1/3rd of the accumulated corpus can be withdrawn tax-free.
  • The remaining corpus is used to avail annuity payments.

Under immediate annuity plans, an annuity is paid immediately after the plan is bought, depending on the annuity option available.

Variants available

Immediate Annuity and Deferred Annuity.

Annuity Options

There are 7 different possible annuity options and multiple variants of the same. Different annuity providers have different annuity options like:

  1. Life Annuity
  2. Joint Life Annuity
  3. Increasing Annuity
  4. Annuity Certain for 5, 10, 15, 20, 25 years
  5. Life Annuity with 50% or 100% annuity to the spouse after the annuitant’s death
  6. Life Annuity with Return of Purchase Price
  7. Joint Life Annuity with the Return of the Purchase Price

Name of the plan

Health Plans

Meaning

These plans cover specific illnesses and help the policyholder with financial assistance if the insured suffers from the covered medical illness.
The health plans offered by Life Insurance companies are usually fixed benefit health insurance plans which cover a specific illness.

Salient Features

  • Health plans can cover critical illnesses, heart-related illnesses or cancer.
  • The premiums are low and affordable.

Benefits Payable

The sum insured is paid in a lump sum if the illness covered under the plan occurs.

Coverage and exclusions in life insurance plans:

Here are the inclusions and exclusions of life insurance policies

Inclusions

Exclusions

Death during the policy tenure due to accidental or natural causes

Death due to suicide within one year of policy inception or revival

Health plans cover specific illnesses

Death due to criminal activities, adventure sports, etc.

Death after the policy has been terminated

Calculation of premium:

Premiums of life insurance plans are calculated based on the following factors –

  1. Age of the insured – the older the insured the higher would be the premium
  2. Sum assured chosen – higher the sum assured, higher would be the premium
  3. Term of the plan – higher the term, lower would be the premium
  4. Medical history – if the medical history is adverse, the premiums are loaded and are, therefore, higher. If there is no history of medical complications, the premiums would be charged at the standard rate
  5. Gender – premium rates for females are lower than males
  6. Occupation – if the insured is engaged in a dangerous occupation, the premium is loaded. The premiums charged are, therefore, higher.

General insurance:

There are multiple variants in the general insurance category. However, some of the most popular types of plans include the following –

Each of the above-mentioned types of general insurance plans is further sub-divided into different variants to suit the different coverage needs of individuals. So, let’s understand each type of general insurance plan in brief along with its sub-variants –

Health insurance

Health insurance plans are those which cover the medical costs if you face a medical contingency. Health insurance plans cover hospitalisation related expenses incurred when the insured is hospitalised.

The different types of health insurance plans include the following –

Name of the plan

Individual Health Insurance Plan

Meaning

Health insurance plans which cover a single individual

Coverage Details

Hospitalisation expenses like room rent, doctor’s fees, nurse’s fee, cost of surgery, blood, etc., daycare treatments, organ donor expenses, free health check-ups, ambulance costs, etc. on an indemnity basis

Name of the plan

Family floater health insurance plans

Meaning

  • Health insurance policy covers the entire family under a single umbrella plan.
  • Covers self, spouse, dependent children and dependent parents/in-laws can be covered under a single sum insured.

Coverage Details

Expenses incurred before and after hospitalisation, hospitalisation expenses like room rent, doctor’s fees, nurse’s fee, cost of surgery, blood, etc., daycare treatments, organ donor expenses, free health check-ups, ambulance costs, etc. on an indemnity basis.

Name of the plan

Senior citizen health insurance plans

Meaning

Health plans cover individuals aged 60 years and above. This could be on an individual basis or a family floater basis.

Coverage Details

Coverage for hospitalisation expenses, ambulance charges, daycare treatments, cataracts, joint replacement treatments, etc. on an indemnity basis

Name of the plan

Critical illness insurance plans

Meaning

Health plans which cover major illnesses and surgical procedures.

Coverage Details

The sum insured is paid in a lump sum if the insured suffers from any covered illness or undergoes a covered treatment. Illnesses like cancer, paralysis, open heart surgeries, organ transplants, etc. are covered.

Name of the plan

Hospital cash plans

Meaning

Health plans pay a fixed benefit if the insured is hospitalised for a period of 24 hours or more.

Coverage Details

A daily cash allowance is paid on hospitalisation. The amount of allowance would be fixed and independent of the actual medical costs incurred.

Name of the plan

Top-up health insurance plans.

Meaning

Health plans come with a deductible limit. Claims exceeding the deductible are paid under the plans.

Coverage Details

Hospitalisation expenses, pre and post hospitalisation expenses. ambulance costs, etc. are covered on an indemnity basis.

Name of the plan

Super top-up health insurance plans.

Meaning

Health plans with deductibles. If the aggregate claims exceed the deductible limit, the plan would cover the excess cost.

Coverage Details

Coverage is allowed for hospitalisation expenses, ambulance charges, daycare treatments, organ donor expenses, etc. on an indemnity basis.

Name of the plan

Disease-specific health insurance plans.

Meaning

Health plans cover specific illnesses like diabetes, cardiac ailments, dengue, etc.

Coverage Details

Hospitalisation expenses incurred due to the illnesses covered by the plan are paid on an indemnity basis.

Exclusions in health insurance plans

Here are some common instances of exclusion in almost all health insurance plans –

  • Pre-existing illnesses are covered after a waiting period of 2-4 years.
  • Specific illnesses and their treatments, like hernia, appendicitis, piles, joint replacement surgeries, etc. are covered after 1-2 policy years.
  • No claim is paid for illnesses within the first 60-90 days of buying the policy.
  • Illnesses due to nuclear or radioactive contamination, war, mutiny, participation in adventure sports, etc. are not paid.
  • Maternity expenses are not included in the coverage unless specifically stated otherwise.
  • HIV/AIDS
  • Alcohol or substance abuse
  • Cosmetic treatments
  • Psychiatric treatments, etc.

Calculation of health insurance premiums

Premiums of a health insurance policy is calculated taking into consideration the following factors –

  • Age of the insured – the higher the age the higher would be the premium
  • Existing medical conditions – if the insured suffers from any existing medical illnesses, the premiums would be increased
  • Gender – females are charged a lower premium than males
  • The term selected – if a longer-term is selected, premium discounts are allowed which reduce the premium
  • Premium discounts – if there are premium discounts offered by the company, the premium would reduce
  • Sum insured selected – higher the coverage amount, higher would be the premium
  • A number of members covered – if family members are also added to the coverage, the premium would increase.

Motor insurance

Motor insurance is taken on vehicles. A motor insurance policy that covers damages caused to third parties is mandatory as per law. Every vehicle on Indian roads is supposed to have a valid insurance cover to be able to run legally.

Motor insurance plans are separately designed for cars, bikes and commercial vehicles. Moreover, there are two types of policies which are as follows –

Third-party liability-only policy

Comprehensive policy

This policy covers the financial liability which incurs if the owner/driver of the vehicle causes bodily injury or death of any individual. Moreover, if any property belonging to a third party is damaged by the vehicle, the financial liability faced for such damage is also covered by the policy.

This policy combines coverage for third party liability and damages suffered by the vehicle itself. Third-party liability due to bodily injury or property damage is covered under the policy. Moreover, if the vehicle itself suffers any damage due to theft, natural causes or man-made causes, the loss suffered is also covered.

There is also a personal accident cover under both these plans. Under the personal accident cover, accidental death and disablement suffered by the owner/driver of the vehicle are covered for up to INR 15 lakhs. In case of accidental death or disablement, a lump sum benefit is paid.

Exclusions of Motor Insurance Policies:

Motor insurance policies do not cover damages incurred due to the following instances –

  • War or war-like perils
  • Nuclear contamination
  • Driving without a valid license
  • Driving under the influence of alcohol
  • Using the vehicle in violation of its limitations
  • Deliberate accidents
  • Driving outside India
  • Electrical or mechanical breakdown, etc.

A premium of motor insurance plans:

Premiums for a motor insurance policy depends on the following factors –

  1. Make, model and variant of the vehicle
  2. Insured Declared Value (which is like the sum insured of the policy and represents the value of the vehicle after depreciation )
  3. Fuel type
  4. Year of registration
  5. Age of the vehicle
  6. Third-party premium
  7. Modifications that were done to the vehicle if any
  8. Type of coverage required
  9. Add-ons selected if any
  10. Location of the vehicle
  11. No claim bonus discount if any
  12. Any other discount offered by the policy

Travel insurance

Travel insurance policies cover the financial losses suffered due to emergencies when you are travelling to another place. The trip might be for leisure, business or education and there is a travel insurance plan to cover the losses faced in any of these trips.

Travel insurance plans are further subdivided into the following categories –

Types of travel insurance plans

Meaning

International travel insurance

Covers losses suffered on international trips

Domestic travel insurance

Covers losses suffered on trips within India

Senior citizen travel insurance

Covers individuals aged 60 years and above going on a trip

Single trip travel insurance

Covers a single trip taken for a specified duration

Annual multi-trip travel insurance

Covers unlimited trips taken within a year

Student travel insurance

Covers students going abroad for education

Coverage and exclusions in travel insurance plans:

Inclusions

Exclusions

Medical treatments taken in an emergency when travelling

Pre-existing illnesses and their complications

Medical evacuation and repatriation

Travelling against the advice of a medical professional

Accidental death and disablement

Participation in hazardous activities

Personal liability

War and related perils

Emergency cash advance

Nuclear contamination

Loss of checked-in-baggage

Pregnancy and related complications

Delay of checked-in-baggage

Criminal acts, etc.

Loss of passport

Trip cancellation or curtailment, etc.

Calculation of travel insurance premiums

Premiums of travel insurance plans are calculated based on the following parameters –

  1. Number of members travelling together
  2. Age of the insured members
  3. Destination of travel
  4. Duration of the trip
  5. Additional covers, if opted
  6. Sum insured selected
  7. Coverage features

Home insurance

Home insurance policies are those which cover the financial loss suffered if the home and/or its contents are damaged. Home insurance policies prove to be beneficial in covering the losses suffered by your home due to natural or man-made calamities.

There are three types of home insurance policies which include the following –

Type of policy

Meaning

Structure insurance

This policy covers the structure of the home against damage or destruction

Contents insurance

This policy covers the contents of the home like electronic appliances, furniture and fittings, jewellery, work of art, personal belongings, etc. against theft or damage

Comprehensive insurance

This policy covers both the structure of the home as well as its contents

Coverage and exclusions in home insurance plans:

Home insurance policies have the following coverage and exclusions:

Inclusions

Exclusions

Damage to the structure due to natural or man-made causes

Loss due to war or war-like conditions

Theft of contents of the home

Wilful negligence

Third-party liability

Consequential loss

Cost of alternate accommodation when the house is being repaired or rebuilt

Nuclear contamination

Depreciation

A premium of home insurance policies:

The premium of a home insurance policy depends on the following factors –

  • The type of policy selected
  • The cost of the property
  • Cost of contents to be insured
  • Policy extensions, if selected
  • Location of the property
  • Basis of insurance – reinstatement or market value
  • Size of the property

Fire Insurance:

Fire insurance policies are those which cover the financial loss suffered if an asset is destroyed or damaged by fire and allied perils.

Fire insurance policies can be of the following types –

Type of policy

Meaning

Valued policy

The policy covers a specific value and pays the value in case of loss

Specific policy

The policy covers up to a specified sum insured limit. In case of a claim, lower of the sum insured or the loss suffered is paid

Floating policy

The policy covers assets at multiple locations under a single policy

Reinstatement value policy

Under this policy, the cost of reinstating the asset which is damaged in a fire or related perils is paid

Consequential loss policy

This policy pays for the loss of profit due to the interruption of activities after a fire

Comprehensive policy

This policy covers all types of loss suffered by the asset

Coverage and exclusions under fire insurance plans:

Fire insurance plans have the following coverage and exclusions –

Inclusions

Exclusions

Fire

War or nuclear contamination

Lightning

Underground fire

Riots, strikes or malicious damage

Theft after fire

Cyclone, tempest, hurricanes, etc.

Intentional damages

Flood

Pollution

Impact damage

Damage in cold storage due to power changes

Aircraft damage

Loss in earnings due to damage suffered

Rockslide or landslide

Removal of debris

Leakage from a sprinkler system

Implosion or explosion

Bush fire, etc.

A premium of fire insurance policies:

  • Nature of usage of the insured property
  • Location of the property
  • Value of the assets being insured
  • Add-on covers opted
  • Size of the property
  • Type of policy opted

Marine insurance

Marine insurance plans cover the damages incurred when goods are being transported from one place to another. These plans, therefore, are very beneficial for businesses as they allow them to avoid a financial loss in case of loss of goods in transit.

Marine insurance policies come in various types the popular of which are as follows –

Type of policy

Meaning

Cargo policy

This policy covers the goods being transported

Hull insurance

This policy covers the vessel which is transporting the goods

Freight insurance

If the vessel operator loses the freight payable on the goods which have been damaged in transit, the policy would cover such loss

Time policy

This policy provides covers a specific time period

Voyage policy

This policy covers a single voyage

Mixed policy

This policy combines time policy and voyage policy and covers trips taken between specific locations within a given period of time

Port risk policy

The policy covers any type of loss suffered by the vessel when it is anchored at a port

Block policy

This policy covers the land and sea voyages

Inclusions and exclusions of marine insurance:

The coverage benefits and exclusions in a marine insurance policy include the following –

Inclusions

Exclusions

Sinking or stranding of the ship

Deliberate loss or misconduct

Fire or explosion

Riots, war or strikes

Earthquake

Insufficient packaging of the goods

Jettison or washing overboard

Loss due to delays

Damage to the vessel due to the collision, piracy, etc.

Wear and tear of the cargo

Natural calamities

Leakage of packaged goods

Wreckage removal

Premiums of marine insurance policies:

The premiums of a marine insurance plan depend on the following factors –

  • Value and the nature of the goods that are being transported from one place to another
  • Amount of freight payable for the transportation
  • An inherent risk of the goods
  • The route of transportation
  • The type of vessel used for transportation and its value
  • A destination where the goods are being taken
  • Underlying risks of piracy, political instability, etc.
  • Possible natural calamities that would incur

Commercial insurance:

Commercial insurance plans are those which are bought by organisations to cover the different types of financial risks that they face. The most popular types of commercial insurance plans include the following –

Type of policy

Meaning

Group Mediclaim policy

A group health insurance policy taken by employers for covering their employees

Workmen’s Compensation policy

A policy designed as per the Workmen’s Compensation Act requires organisations to compensate their employees if the employees fall ill or are injured due to the nature of their employment

Commercial General Liability insurance

A policy that covers the multiple types of liabilities faced by businesses in their everyday operations

Directors and Officers insurance

A policy that covers the directors and officers of an organisation against the liability faced due to their mistakes and errors

Doctors Professional Indemnity policy

A policy that covers the liability faced by doctors due to negligence or error in their practice

Cyber insurance

A policy that covers the cyber risks faced by organisations and indemnifies them in case of cyberattacks.

How to buy insurance?

Here are the ways in which you should go about buying a suitable insurance policy for yourself from the different kinds of insurance plans–

  • Offline 

    You can buy insurance policies offline through any of the following modes –

    • By visiting the branch office of the insurance company and applying for the desired policy physically
    • By getting in touch with an insurance agent or a broker and buying the policy sold by him/her
    • By contacting an executive of the insurance company to visit you and help you buy the insurance policy 
  • Online

    The online mode is easier as it allows you to buy a suitable insurance policy conveniently, from your own home or office. Moreover, many insurance plans are issued instantly when you buy them online which helps in saving time and effort. 

    Many insurance companies, online aggregator websites and online brokers sell insurance plans online. You can choose any online marketplace and find the best policy that you want.
    You can also choose Turtlemint which offers you some of the best benefits. Turtlemint is tied up with leading insurance companies, both life and general insurers, allowing you to select the best plans available in the market. You can compare the main types of insurance plans on Turtlemint’s website and then buy the best. You can also get personalised assistance for any queries that you have during the purchase process. Turtlemint’s personalised service helps you find the best insurance plan. Just visit Turtlemint’s website at www.turtlemint.com, compare and buy the plan that you need.

Things to keep in mind when buying insurance:

Now you know how many types of insurance plans are available in the insurance segment. However, when you are choosing an insurance policy, the following things should be kept in mind –
The different forms of insurance are relevant given the different types of financial risks faced by individuals as well as businesses. So, choose suitable insurance plans based on your risks and enjoy financial security. Also, compare the available insurance policies online to find a policy that offers the best coverage benefits at the most affordable premium rates.

FAQs

  1. What are the tax benefits of insurance?

    Life insurance and health insurance plans allow tax benefits. The premium paid for life insurance policies qualifies as a deduction up to INR 1.5 lakhs under Section 80C. Premiums paid for health insurance policies or riders offered by life insurance companies qualify for deduction under Section 80D. The limit of deduction is INR 25,000 which increases to INR 50,000 for senior citizens. Buying a separate health plan for senior citizen parents and paying premiums for them would also allow an additional deduction of up to INR 50,000. Besides tax benefits on premiums, the benefits received from a life insurance policy are also completely tax-free under Section 10 (10D).

  2. What is the duration of health insurance plans?

    Health insurance plans are offered for one year. However, you can buy coverage for two or three continuous years too by paying the aggregate premium at once.

  3. What is group insurance?

    Group insurance plans are those which offer coverage to a group of individuals under a single plan. For instance, group insurance plans can be bought by the employer for their employees, banks for their account holder, etc.

  4. Can I buy a life insurance policy for my child?

    Yes, you can buy a life insurance policy for your child. In that case, the child would be the life insured and you would be the policyholder.

  5. What is the meaning of the nominee?

    A nominee is an individual who is authorised to collect the death benefit if the insured dies.

Complete Guide to Choose the Best Car Insurance Policy in 2021

In India, car insurance is a mandatory requirement for all car owners, courtesy the Motor Vehicles Act passed in the year 1988. So, every proud car-owner in the country is also the owner of a car insurance policy. Though car insurance is mandatory, when it comes to buying or car insurance renewal, many car owners don’t know how to choose the best car insurance in India. The technical nature of the policy often confuses them. What about you? Do you know how to buy the best car insurance policy in India?

If you don’t, no need to worry. Here are some pointers to keep in mind when buying car insurance. These are an ultimate guide to help you choose the most suitable and the best car insurance policy in 2019 –

  • Choose the correct type of plan
    When you look for car insurance, you would find third party car insurance online as well as comprehensive plans. These are the two types of car insurance policies which are available in India. While third party plans cover only the financial liability you face in case of causing a loss to a third party, comprehensive plans also cover the damages which your car suffers. If your car is new or aged below 5 years and you use your car frequently, a comprehensive car insurance coverage would be ideal. However, if your car is old (more than 5 years old) and/or you don’t use the car so frequently, a third party coverage would be sufficient. So, assess the requirement of coverage and choose the best insurance policy for your car.
    Read more about All you need to know about car insurance
  • Compare before you buy
    Did you know that there are dozens of car insurance policies available in the market? Being a mandatory cover, car insurance policies are offered by almost every general insurance company. As such, you have a variety of coverage options at your disposal. Every available policy has something different to offer and so, before buying or renewing your car insurance online, you should compare the available plans. Look for the most inclusive coverage features at the lowest of premiums so that you get the best car insurance in India.
    Read more about How to choose about the best car insurance company
  • Choose the required add-ons
    Comprehensive car insurance plans allow optional additional coverage benefits which you can add to your policy for a wider scope of coverage. These add-on coverage features, however, come at an additional premium. So, if you are buying a comprehensive plan, choose only those add-ons which are suitable for your needs. Roadside assistance add-on and zero depreciation add-on should not be avoided. While the former provides round-the-clock assistance in case of a breakdown, the latter nullifies the effect of depreciation and increases the claim amount. These add-ons, therefore, are useful additions to your coverage. Other add-ons, however, should be opted only if required. For instance, if you live in an area which gets water-logged in monsoons, opt for engine protect add-on to get a claim for engine damage due to water-logging. So, the available add-ons should be understood clearly and then chosen as per requirement so that your coverage is the best car insurance coverage for your car.
    Know about Car insurance terminologies you should know
  • Look for maximum discounts

    Your car insurance policy allows for various types of discounts if you opt for a comprehensive cover. You can, commonly, get a discount for the following –

    • Accumulated No Claim Bonus if you are renewing the policy and there were no claims in the previous year(s). For every claim-free year you would get a bonus in the form of premium discount. The bonus starts @ 20% and goes up to 50% if no claims are made in the last five policy years
    • If you are a member of a recognised automobile association like Automobile Association of India, etc.
    • If you have installed safety devices in your car like ABS, anti-theft system, child locks, etc. which help in reducing the occurrence of claims
    • If you choose a voluntary deductible and undertake to pay a part of your claim yourself. The higher the level of voluntary deductible that you choose the higher the premium discount you can claim
    • If you buy the policy online directly from the insurance company

    Look for the maximum possible discounts when choosing the policy so that you can reduce your premium outgo and save money.
    Read more about Discounts on car insurance you did not know about

  • Choose an optimal IDV for the policy
    IDV stands for Insured Declared Value and it represents the sum insured of your car insurance policy. If your car is stolen or if it is damaged beyond repairs, the insurance company pays the IDV as claim. The IDV is calculated by deducting the age-based depreciation from the market value of the car. When buying or renewing a car insurance policy, you should ensure that the IDV is proportionate to the car’s age. Choose a higher IDV so that the claim that you get in case of total loss or theft of the car is high. The policy which offers a high IDV would be the best car insurance policy.
  • Check the network of garages
    Car insurance policies pay a cashless claim only if the car is repaired at a garage which is tied-up with the insurance company. Cashless claims are better as they remove any financial burden on you and so you should choose an insurance company which has the widest network of garages empanelled with it. If the network would be wide, your claim would be settled easily making your policy the best car insurance policy.
    These are some of the factors which should be considered when buying or renewing car insurance online. If you follow these pointers, you would be able to get the best car insurance policy for yourself and that is what you want, isn’t it?
    Read more about All you need to know about car insurance

The 7 Best Bike Insurance Providers In 2021

Bike insurance is compulsory if you have a bike and you want to drive it within India. The Indian Motor Vehicles Act, 1988 mandates having a valid bike insurance policy for all bike owners. Given the necessity, mostly all general insurance companies offer a two wheeler insurance policy. Amidst so many companies, do you know which are the best bike insurance providers in India?

Though all general insurance companies offer good bike insurance policies, here are seven of the top rated companies in 2020 –

  1. HDFC Ergo General Insurance Company
    HDFC Ergo is a leading name in the general insurance segment which offers a range of general insurance plans, both retail as well as commercial. Some of the salient features of the company include the
    following –

    • The company has a customer base of more than 1 million
    • Claims are approved within 30 minutes and claim can be intimated online making it easier for the policyholders
    • 24*7 support is provided for all your queries and needs
  1. Bajaj Allianz General Insurance Company
    Another leading name, Bajaj Allianz offers several unique benefits to customers which makes it a top rated bike insurance provider. These benefits include the following –

    • The company is tied-up with more than 4000 garages across India for cashless claim settlements
    • If cashless facility is not available, the company settles 75% on account
    • A quick inspection is required in case of lapsed policies
    • Motor on the Spot claim settlement service is offered by the company wherein claims can be filed through mobiles for quick settlements
  1. Bharti AXA General Insurance Company
    Bharti AXA offers both comprehensive as well as third party liability policies which have some of the most comprehensive coverage benefits. The benefits of buying the policy from Bharti AXA include the
    following –

    • A network of 3800+ garages for easy cashless claims
    • 24*7 claim assistance services
    • Attractive discounts on premiums so that the policy becomes affordable
  1. The New India Assurance Company Limited
    New India is a public sector general insurance company which enjoys immense trust from its customers. The features which make the company’s bike insurance plans attractive are as follows –

    • A range of add-on covers are available for customising the plan and for making it comprehensive
    • The company has international presence in about 28 countries
    • CRISIL has rated the company AAA/Stable which shows the stability of the company
  1. Liberty General Insurance Company
    Liberty is a relatively new company which has rapidly made its presence known in the general insurance segment. The company offers a wide range of general insurance plans, two wheeler insurance being one of them. The benefits offered by the company are as follows –

    • The company has more than 2500 partner garages ensuring you have hassle-free cashless claim settlement
    • The company’s claim settlement ratio is 95% which shows that most of the company’s claims are settled
    • The company has several awards in its kitty like SAP Pinnacle Award 2015, Rising Star Insurer Award at the Indian Insurance Awards, etc.
  1. TATA AIG General Insurance Company Limited
    TATA AIG is a joint venture between two reputed companies, TATA Group and the American International Group (AIG). The salient features about the company are as follows –

    • As of September 2018, the company’s asset base stood at INR 8035 crores which shows that the company is stable
    • The company settles maximum claims which are made on it
    • TATA AIG has a wide network of cashless garages in India
  1. Reliance General Insurance Company
    The last company on the list is Reliance General Insurance which is a part of India’s leading conglomerate Reliance Group. The company has the following benefits for its customers which make it a name to reckon with –

    • The policy is issued and delivered within 10 seconds flat
    • The company has ISO 9001:2015 certification adding to its reputation
    • A free roadside assistance cover of INR 500 is allowed under the company’s motor insurance policies

These are the leading bike insurance providers in India in 2020. You can choose a policy of any of these companies and you would get comprehensive coverage, affordable premium rates and world class service from the company. Turtlemint is associated with all these leading insurance companies and offers their bike insurance policies. You can visit Turtlemint’s website at www.turtlemint.com and choose the most suitable bike insurance policy for your needs. The purchase process is simple and Turtlemint would also help you get the settlement of your claims.

Read more about How to get your claims settled simply?

So, what are you waiting for? Buy your bike insurance policy from a leading insurer and get the best insurance experience.

Read more about Buying a Bike or the first time? Know about Bike insurance policy.

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

These mistakes can cost you a comfortable retirement

When you think of retirement you think of days when you can sit back, relax and enjoy life one day at a time. However, relaxation and enjoyment come at a price. You need a source of income post retirement so that you can lead a comfortable life. Since you are no longer in active employment, you need a retirement fund for meeting your lifestyle expenses. That is why a nest egg is required.

Though you know this, you make many mistakes when planning for retirement. These mistakes prove hazardous and take away the comfortable retired life which you have dreamed for yourself. Below is the list of some common mistakes which people commit when it comes to retirement planning. Find out which ones are you committing –

#1 – Starting late

A very common and yet the most dangerous mistake is delaying your retirement plan. When you are young and in the prime of your career retirement is the last thing on your mind. Be that as it may, retirement planning should start from an early age if you wish to accumulate a substantial corpus over the years. When you start early you get the benefit of compounding and the returns are substantial over a long-term horizon. Moreover, you don’t need to save substantial amounts to create an optimal fund. If started early, little amounts would also amass to a considerable corpus because of the power of compounding. For instance, if you start retirement planning when you are 30, you can accumulate a corpus of about INR 1.90 crores even if you save INR 5000 per month and the interest rate is assumed to be a moderate 10% per annum. The same corpus reduces to INR 1.13 crores if you delay by merely 5 years and start investing at 35. So, delaying your retirement plan is a bad move.

Remedy – Be the early bird. Start early, invest affordably and build a substantial retirement corpus.

#2 – Investing primarily in fixed income investments

Many of you are risk averse and don’t want to take chances with your retirement funds. As a result, you invest in investments which provide fixed and guaranteed returns. While fixed returns are not bad, they lose their value against inflation. Since you are building a retirement corpus, you would need funds after a specified time. Over that time inflation would eat into the fixed returns and the corpus generated would prove insufficient to meet the inflated expenses post-retirement.

Remedy – Choose investment avenues which are linked to the market so that your corpus becomes inflation adjusted. If market volatility is a problem you can choose market-linked debt funds which would minimize risks while at the same time making your corpus inflation-proof.

#3 – Irregular savings

Investing in retirement is not a one-time affair or a practice which you can undertake when you want to. Only a regular and disciplined savings approach would build up a corpus sufficient enough to pay for your life post-retirement.

Remedy – Create a disciplined investing portfolio where you direct funds towards retirement on a monthly basis.

#4 – Insufficient health cover

When it comes to medical expenses everyone knows that they have become unaffordable for a common man. Medical inflation has increased so much that an average hospitalization threatens to burn a deep hole in your pockets. Moreover, as you grow old, illnesses increase requiring frequent medical attention. In such a case if you do not have sufficient health insurance cover in retirement, you might face a financial nightmare.

Remedy –Invest in a health insurance plan with a coverage optimal enough to provide for your medical costs post-retirement. If affording the premium is difficult, choose top-up or super top-up health plans to increase the coverage while keeping premiums low. Try increasing the coverage level as you near retirement to ensure a decent level after you retire.

Read more about Why super top-up is the need of the hour?

#5 – Continuing loans till old age

When you have loaned a part of your income is spent on paying the EMIs. If loans are continued till your old age, you would be paying off the EMIs from your retirement corpus. This would reduce the corpus and might make it insufficient for meeting other financial obligations.

Remedy – Try and pay off your loans as soon as possible. Do not continue them beyond the age of 60 years when retirement is on the horizon. Retire as a debt-free individual to have financial security.
If you are making any of these mistakes, try and rectify them. You have been given the remedy and now it’s on you to create a fool-proof retirement plan which would ensure your retired life to be a golden period.
Read more about Retirement and annuity pay-outs what you should know?

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Bought a term plan? Don’t forget to renew it timely

A term insurance plan is a life insurance policy which promises to pay a benefit if the insured dies during the chosen tenure of the policy. For instance, if you buy a term plan for 20 years and death occurs within these 20 years, the sum assured is paid under the plan. If, however, the term is over and the insured survives, there is, usually, no maturity benefit. So, if, after 20 years, the plan matures and you are alive, you do not get any maturity benefit. Term plans are important in the sense that they have very low premiums. As such, they allow you to opt for high levels of sum assured and create the promise of financial security for your family in case of your untimely demise. In fact, term insurance plan is the only avenue which provides financial security to your family members as they are assured of a benefit in case you are not around to provide for them.
Since term plans cover death during the tenure, it is advised to buy a plan with the longest possible coverage tenure. When you choose a longer tenure, the risk is covered for a longer duration and the probability of claim increases. Though long term coverage is prudent, it is also prone to discontinuation and policy lapse. Many of you tend to discontinue premium payments under the plan after some years as you don’t get any return. This results in the lapse of the policy and the coverage stops. Is it a wise move?

No, it isn’t. Renewing the plan regularly is important. Here are the reasons why –

To get continued coverage

When you pay the renewal premiums within the due date, you can continue the coverage of the plan for the stipulated tenure. A continued coverage ensures that the death benefit is paid if death occurs during the term of the plan. Thus, when the coverage continues, coverage for the risk of premature death also continues under the plan.

Term plans have no paid-up or surrender value

When you discontinue paying the premiums the policy lapses. A lapsed term insurance plan not only stops risk coverage, it does not even provide any paid-up benefit or surrender value. Term insurance plans are pure protection plans covering only the risk of premature death. That is why the premiums are bare minimum which covers the death risk. Since the premium of term plans has no saving element, the plan does not pay any paid-up value or surrender value when the premiums are discontinued. Once the plan lapses the risk cover ceases and all premiums that you had paid till discontinuation are forfeited by the insurance company. You get no benefit from discontinuation and so renewal of term plans makes more sense.

A continuous plan gives financial security

The whole purpose of buying a term insurance plan is to provide your family with financial security even in your absence. If the plan is not renewed regularly, the coverage stops and the promised financial security is no longer available. In case of death when the policy is in a lapsed state, no benefit is paid to your family. Thus, only on continuous renewal of the term plan can you provide your family with the sense of continued financial security.

You also get tax benefits

Renewing your term insurance coverage is also beneficial in saving tax. The premiums that you pay for the plan are allowed as a tax deduction under Section 80C up to INR 1.5 lakhs. Moreover, when the plan is renewed, the coverage continues and the death benefit paid is also tax-free under Section 10 (10D) of the Income Tax Act. Thus, continued term insurance coverage is tax saving too.

Read more about All the tax benefit you need to know of your life insurance policy

Given these benefits and the importance of renewals, renewing your term insurance policy on time is a must. While you buy a term plan for its benefits, the benefits would cease to exist if the plan is not renewed. So, make it a habit of paying the premiums within the due date for continued coverage. You can also place standing instructions on your bank account or create an ECS facility for paying the premiums automatically when they are due. This would reduce the chances of lapse and would provide you and your family with continued financial security throughout the term of the plan.

Read more Types of life insurance plans

Read more How insurance can help your finances grow

Read more Does term insurance cover all types of deaths
 
Check out our video below to understand if you can nominate your friend in a life insurance policy?

 

Are life insurance plans a good investment option for individuals?

Why do you buy life insurance plans? Is it to achieve financial security for your family or is it to create wealth?

It is only human to want more and so many of you want to avail multiple benefits from your life insurance investments. Insurance companies also understood this sentiment of their customers and so they designed plans which fulfilled these needs. Earlier, life insurance only meant term insurance plans which paid a benefit only in case of death. However, with customers wanting returns from their insurance policies, various savings oriented insurance plans were designed. Today, there are two kinds of plans which offer investment returns. They are –

  1. Endowment plans
  2. Unit linked insurance plans (ULIPs)

Endowment plans are traditional plans which create guaranteed savings. They might declare bonuses which enhance the benefits payable. Moreover, guaranteed additions, loyalty additions, etc. are also promised under most endowment plans to increase the corpus. Endowment plans are long-term plans which come with durations ranging from 10 years to up to 30 years.

Unit linked plans, however, are modern day insurance plans which give the benefit of market-linked returns. These plans have been designed with the sole purpose of providing returns and they work on the concept of mutual funds with the addition of life insurance coverage. The premiums paid are invested in various funds which, in turn, invest in stocks and securities of the capital market. As such, ULIPs provide returns depending on the market performance and aim to maximise your wealth. The investment tenure of ULIPs is also flexible. You can choose a plan with terms ranging from 5 years to up to 30 years and above.

Both endowment plans and ULIPs have their relative merits and demerits. You should know about them before you choose to invest in these plans. So, here we go –

 

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The take away

Life insurance is meant to create financial security for yourself and your family. Though endowment and unit-linked plans provide returns, they do not provide sufficient coverage for securing your finances in case of premature death. A term insurance plan, in this regard, is the best solution. However, term plans have no investment returns. Life insurance plans are meant to be protection tools which aim to create an emergency fund and not to create wealth. If you, however, are looking for a combination of insurance and investment, you can choose the above-mentioned life insurance plans. But understand these plans in details and look at their pros and cons before making a choice. A life insurance policy, after all, should be bought with a complete understanding of the plan and its benefits, isn’t it?

Read more How to save income tax in 2019

Read more 8 financial instrument you can quickly buy online to save tax in India
 
Already having a term insuance & you wish to increase the cover amount? Check our video to know more

 

Don’t hide your pre-existing illnesses when buying health insurance

One of the most common mistakes which most of you commit when buying a health insurance plan is not disclosing or lying about your medical condition when filling up the proposal form. You believe that disclosing your existing medical complications would either result in the rejection of the policy or, if the policy is accepted, the premiums would be increased. What you don’t realize is the fact that hiding about your pre-existing conditions would put your claim in jeopardy if the claim occurs due to such conditions. As such, informing the insurance company about your pre-existing illnesses is a wise thing to do. Health insurance companies allow coverage for pre-existing illnesses with some terms and conditions. Let’s understand what these terms and conditions are –

Definition of pre-existing illnesses

Pre-existing illnesses or conditions are those medical ailments which you already suffer from at the time of buying a fresh health insurance policy.

How pre-existing illnesses are covered in health insurance plans?

Health insurance plans cover pre-existing illnesses after a specified duration which is called the waiting period. Every policy has a waiting period of 1 year to 4 years for pre-existing conditions. During this waiting period, any medical complications arising out of pre-existing illnesses would not be covered by the policy. However, if the policy is renewed continuously, once the waiting period is over, pre-existing illnesses would be covered. After the waiting period, complete claim settlement would be allowed for any medical complication which arises out of pre-existing conditions subject to the conditions mentioned in the policy you purchased.

Read more about What is waiting period in health insurance?

Why is disclosing pre-existing illnesses necessary?

Health insurance policies are policies of ‘utmost good faith’. The insurance company would assess your risk and accepts your proposal based on the information you provide in the proposal form. If you hide about your pre-existing conditions, you breach the principle of utmost good faith. As such, when a claim is incurred because of the hidden information, the company holds the policy null and void and rejects your claim. To avoid any possible claim rejection, disclosing your pre-existing conditions is essential. Though coverage would not be available in the initial few years of the waiting period, you would ultimately enjoy coverage for your pre-existing conditions when the waiting period is over. So, it is better to disclose about your conditions and wait for coverage rather than hide the information and run the risk of claim rejection.

Know about health insurance claim in the below video

 

Buying a health plan with a pre-existing illness

  • If you suffer from any medical complication when buying a health plan, disclose the condition in the proposal form.
  • Look for health insurance plans which have low waiting periods so that your pre-existing illnesses get covered at the earliest.
  • Buy health insurance at a younger age so that you can wait out the applicable pre-existing waiting period and avail coverage when any illnesses develop.

Pre-existing illnesses do not mean that you cannot enjoy comprehensive health insurance coverage. You can. There is just a small waiting period after which you are offered coverage. So, don’t hide about your pre-existing illnesses when buying health plans. Disclose them and enjoy undisputed coverage.

Read more about 10 things to keep in mind before buying health insurance

Read more about Types of health insurance plans