Insuring your Child? Five Harsh Facts.

Insuring your Child? Five Harsh Facts

Have you bought or are you planning to buy an Insurance Policy for your child? Your objective is almost certainly to create a nest egg when she becomes a major or probably inculcate the habit of saving and thrift. Before you put down the first premium, check the following:

1.       Is your child earning an income?

Insurance is a substitute for economic value. If your child is not currently earning an income, he does not (sorry to say this) have any current economic value.  You may say that he has potential economic value, which only means that he has a potential insurable interest, but none now. Ergo, he need not be insured. To fulfill his potential he needs economic support, which is provided by you: you need insurance.

Of course, there are children who earn incomes: child TV stars for example. They need insurance because they represent economic value.

2.       No Risk Cover Before the age of 5, or 7 or even 8:

It is pretty difficult for an insurance company to assess risk for small children. Most insurance companies will not offer risk cover before your child is at least 5 years old. Even if you do buy a policy, you have to check if on submitting a claim, the insurance company will return the entire sum assured. Some companies may stagger the claim payout in the initial years (technically called a “lien”), or just return the premiums paid (with or without interest).

3.       Automatic Vesting:

All child policies in India have a mandatory “auto vesting” clause. What this means is that the moment the child turns 18, the policy owner (i.e. the person who purchased the policy and paid all premiums till then) loses all control over this asset. While you may argue about the pros and cons of this clause based on your current emotional situation, any clause which does not have an escape clause must be carefully evaluated.

4.       Child Policies are all savings oriented policies:

Does that tell you something? Insurance companies do not issue pure risk policies on children precisely because the following two principles are keenly followed:

·         Insurance can be sold to only those that earn an income

·         Mortality risks in children is not easy to assess

(Purists will argue that there are other reasons like inability to manage a contract and so on, but the above 2 reasons exemplify the argument).

5.       Premiums are cheaper if the age is below 18:

Many would argue that this is a positive. However consider that if your objective is not to en-cash on anything untoward happening to your child, a lower premium rate is irrelevant. If your objective is only as stated above (nest egg creation/inculcating thrift), there are possibly other ways you must explore before you buy life insurance. Life insurance as a savings tool is not always terribly efficient.

Many child insurance policies on sale today in India do not cover mortality risk of the child but are policies that are meant for adults: the child is usually the beneficiary. Since children can be the beneficiaries of almost any life insurance policy, you may want to check competing products to see if the one on offer has any specific advantage. Child Insurance policies can also be surprisingly inflexible, with some offering pre-determined money-back installment schedules based on a parent’s current view on the child’s future occupation. All child insurance is an emotional sale, and insurance company agents know that. As a person financially responsible for the wellbeing of those you care for, it is important to adequately insure yourself first.

We at www.policylitmus.com know that purchasing insurance is not an easy task, which is why we have compared over 900 products from 50 companies to make this choice easier for you.

Amit Kumar

Why are so many people victims of Insurance misselling?

Blame yourself!

Almost everyone knows someone who has bought a policy and has regretted it. Sometime back I had conducted a quick, informal 5-question survey that threw up some interesting results.

Almost all of those who were surveyed, knew the person who had helped them purchase (usually their agent); most of them could remember the premium commitment they had made, somewhat lesser numbers were unaware of the details of the product they had purchased (those who scratched their heads and came up with vague replies like LIC or Money-back or ULIP were marked as people who could not remember details). A few cavaliers could not name the company they had purchased from (Customers of LIC were honorable exceptions when it came to remembering the company).

I summoned up the courage to ask them the final question: if they knew enough about payment schedules and bonus rates and fund apportionment and claim repudiation ratios. Replies were fairly colorful; suffice to say that the survey wound up at that spot.

We all know why we buy. I can say with a fair degree of certainty that it is almost always never for the right reason. Why is it that when we pay that first few thousands as premium we do not find out what we are getting into? If we buy for the wrong reasons and then cannot even remember what we bought, can we be called victims of misselling?

Think of the time you purchased your last smartphone, or television, or when you planned your family vacation. Remember how you had agonized over the choices, pored over the details, asked your friends, compared on the internet and generally made life hell for those around you? Now think of the time you plunked down the first premium for your insurance.

If you feel that this only applies to you, pause, you are in good company. Our inability to do a little research before we buy insurance is widespread in the population. Industry captains, smart entrepreneurs, government clerks, you name them, and they are in the list. It is obvious that an agent will spot this advantage and move in. Can you then blame him for selling you a dud? The fact is we cannot escape the responsibility of our own inaction.

This does not in any way condone the behavior of an agent who mis-informs and makes a sale. At our end, a little research, however, goes a long way. You can still oblige your tax advisor, or your friend, or save tax or whatever else is your reason for buying. But there is no reason for you to not make an informed decision on buying Insurance.

Amit Kumar

Best Health Policies after Retirement In India

Best Health Policies after Retirement In India

For quite a few of us, our employer provides medical cover and often bears the cost of medical insurance.  But once you retire you are on your own. One of the first things that hit you is that you need to find is a health insurance cover.   And to our surprise (really!!), suddenly the premiums for most insurers have taken a sharp turn north after the age of 60.  Your health may not have changed much in a year but insurers are keenly aware you now don’t have the power of a group to negotiate.  

I have collated a list of the Best Health Insurance Policies over the age of 60.  For the purposes of comparison I have taken a 61 year old retiree in Pune looking for a cover of 4 lakhs.    For the purposes of our comparison we take policies that offer guaranteed renewal at least up to the age of 80 (About 10 years beyond the average life expectancy in India).

We compare the policies and insurers on:

1.  Premium

2. Sub limits

3. Co-Pay

4.  Servicing Aspects(like claims payment speed and customer satisfaction)

5.  Hospital Network

Premium:  

This is probably the first criteria that people look at.  So let's look at the five most economical plans for senior citizens.

Health Premiums for 61 yrs old couple in Pune. Source www.policylitmus.com

From the comparison above, you can see the premiums vary quite substantially. The most expensive of the top 5 being 90% higher than the most economical. In terms of benefits there is not a whole lot of difference. Most of offer the basic hospitalization, Pre and Post Hospitalization benefits, Ambulance and health check-up.  All that you seems to get for about Rs 14000 extra in Apollo’s Easy Health – Standard is Ayurvedic treatment up to a maximum of Rs. 25000 and Donor Expenses. In case of Tata AIG, you pay an extra 18000 for the same benefit. You decide if this is worth the extra premium.

United India’s family Medicare and Bajaj’s Health Guard offers renewal up to age 80. The rest have lifelong renewal option. If you happen to live beyond 90 years, Future Generali will actually reduce your premiums.

you should find out  the best health Insurance plan for your specific case.

Sub limits and Co-Pays:

Insurer’s and notorious for hidden terms and conditions that you become aware of once the time comes to make a claim.  Of all the terms and conditions there are two you should pay careful attention to. They are sub limits on hospitalization expenses and Co-Pays. These caps can often leave you out of pocket for a substantial amount. Here is a snapshot of how these plans compare on hospitalization sub limits.

While the comparison is self-explanatory, I would like to point out a few key things.  Among the Plans compared Apollo’s Easy Health – Standard has no sub limits.  Rest of the plans have Rs 4000(1% of sum Insured) as the room rent limit.  This amount may be suitable if you are in tier-II city or if you go for a shared accommodation but may not be enough if you want to go for private room in a high end national chain hospital.

United limits the reimbursement amount for major Surgeries to Rs 2,80,000. This may not be such a things if you go to one of the preferred network hospitals of United India Insurance.  The hospitals is the preferred network agree to charge as per United’s agreed rate list. This allow to save up your sum insured for future needs while not having to pay out of pocket.

 Only United’s Family Medicare and Bajaj’s HealthGuard have the requirement of Co-Pay.

Service Parameters:

Network Hospitals: 

One thing that you must consider is whether the insurer has cashless facility in the hospital of your choice. When you have a medical emergency you cannot worry about arranging cash or run around to get reimbursement from the insurer later. In my opinion if the insurer hasn't bothered to have sufficient cashless facility in your city, the insurer doesn't deserve your business.  Please check to ensure that the Insurer has cashless hospitals in your city.

Other Features:

In conclusion I would say that if you are in a tier –II city, Future’s health Suraksha is a good option. If your preferred hospital is a top end national chain in a tier-I city, Apollo’s Easy Health – Standard offers a plan with no sub limits.

Amit Kumar

Who is a good Insurance Agent? (And where do I find him?)

Who is a good Insurance Agent? (And where do I find him?)

A good Insurance agent is difficult to find.

Hogwash! You may say. Every street and every office has more than one. At least everybody that you know and his uncle are Insurance Agents.

Check the list below and see if the chap you know (or heard of) meets the criteria to be a good Insurance agent.

□Pride in his Agency: There are three professions in the world which use the word “solicit” to source customers: Lawyers, you know who, and Insurance Agents. Don’t know about you, but my sympathies lie with the agent.

 He who presents his ID with a smile, and takes pride in his profession will stay with you longer and sell you the right stuff. A good agent will start his first interaction by sharing his own profile, his achievements and successes within the industry or his company, and how long he has been working.

Unfortunately, the ones that we often meet are the ones that will announce surreptitiously that he is (also) an agent. Stay away from them.

□Persistent but Never Pushy:  Most agents are persistent, some are obnoxious. A good agent is persistent, but never pushy and always polite. What is the difference? Good agents seek an appointment and time, so that they can be sure of explaining what they have to say. They believe that if a customer refuses to buy, it is because they have failed and not that the customer is an idiot. Somehow, they also seem to understand when a “no” is final.

 If your agent is fond of skipping details or is busy trying to shove a form under your nose for a signature, look again for someone else.

□Knowledgeable: A good agent’s starting point is to ascertain your needs and then attempts to find a product that will fulfill those needs. They know their company’s products and more than a little about the competition.

If your agent cannot name at least two competing products and why his product better fulfills your need, you can be sure he is in the wrong business. Ask for the product brochure and an illustration, so that you can verify at leisure. Agents who do not leave company literature may have something to hide.

□Rebate: Good insurance agents will be offended if you ask for a premium rebate, and may prefer to walk out if you insist on it.

If he does offer you a rebate, he is either not serious about his profession, or may compromise on service, later.

If you can tick all the four boxes for your agent, you are on to a professional and satisfying relationship.

Where do I find him?

You guessed right! Finding this paragon is not exactly easy, but they do exist. But that is a subject for our next blog!

We at policylitmus.com  provide the best Insurance comparison results for all types of insurance without needing you to give out any personal details.

Amit Kumar