Five Questions to ask before buying Life Insurance

Do I need Life Insurance?

People who buy life insurance often ask themselves: “Do I really need Life Insurance”? It is true that not everyone needs to have life insurance.

Before you decide to buy life insurance ask yourself these questions:

1.       Are you married?

2.       Do you have Children or you plan to have children?

3.       Is your family dependent on you for their financial needs?

4.       Do you have parents who you have to support financially?

5.       Do you have a Mortgage for Home, Loan for your car or an unpaid educational loan?

If answers to these questions is a NO Don’t bother. Life Insurance is not for you.  On the contrary if you have answered ‘Yes’ to any of the above questions, you should consider life Insurance.

Appropriate amount of Life insurance will ensure that your loved ones are not left with financial hardship should you pass away (All of us are going to go one day).

The question that arises next is how much life insurance do I need?

If you want to ensure that your family continues to have the same level of financial security in your absence, then the interest from your Life Insurance pay out should be equal to your monthly income. Given the interest rates in the country today, you should insure yourself for about 12-15 times your annual income.

How long should I have life Insurance?

This is a fairly simple question to answer. You should insure yourself for your entire income generating life; in plain English until the age of anticipated retirement. In India this usually up to the age of 60. If you intent to work beyond that you may want to ensure yourself beyond the age of 60.

Remember the older you grow more expensive it is to buy life insurance and your options are limited as well.  Bottom line is that buy Life Insurance as soon the answer to anyone of the questions above is yes if you don’t want financial hardship to befall your loved ones in your absence.

Amit KumarHeart

Health Insurance Policy Explained - Part II

Health Insurance policies have different built-in features, features that vary from company to company and from product to product. Features are those elements that are in-built into a policy, while covers are additional elements one can opt for. As an analogy, let us say you are considering a phone with a built in camera and an option to add a memory card for external storage. The camera is the “feature” in the phone and the external card option is the “optional cover”.

Let us discuss some features in Health Insurance policies today. Some are useful and some are quite superfluous. The decision to select these features must be based on your life situation and your personal preferences.  

Policies that Pay/Permit/Arrange Health Checks: Periodic health checks are useful in today’s context. Insurance companies pay for these checks. These are usually part of the features within a policy. However most companies will require continuous insurance for at least 2/3 years before one can avail reimbursement for a health check-up. Amounts reimbursed can be much lesser than what you would normally incur, hence it is important to know limits. Certain companies specify the hospital where you can get this done, the number of members who can avail this feature, and the kind of tests that you are eligible for. If pre-arranged, this option is especially useful because no cash need be paid up front. We feel this is a useful feature to look for in your policy.

Policies that Allow a Non-TPA Discount: Most insurance companies have tied up with third party associates (TPAs) to help them process claims. It is obvious that a fee needs to be paid to them by the company. Thus if you opt to not use the TPA’s services, and deal with the insurance company directly, you can get a discount in the premium. We are divided in our opinion on this issue: you may save some time if you use the TPA, however the TPA does not do any function which you personally cannot execute.

Policies that Permit Optional Deductibles: Insurance companies are happy to insure clients that have a skin in the game. If you opt for a deductible, which are usually fixed amounts, the insurance company will reimburse claims for amounts over and above the fixed deductible. For example, let us say that you have opted for a fixed deductible of Rs. 10,000. If you have a claim for Rs. 12,000, the insurance company will pay you Rs. 2000 only. If your expenses in hospital were Rs. 8000, there will be no reimbursement from the insurance company. Deductibles can be per claim or per policy. Choose deductible plans wisely, depending on your life situation. Premiums can be significantly lower; however claims could see you going out-of-pocket.

In our next blog, we shall discuss “nice-to-have” covers.

You can find the best health insurance policies for you   at www.policylitmus.com.

Amit KumarHeart

Critical Illness Insurance: Vital but under appreciated.

I have health Insurance. Is that not enough?

With the rising health care costs it is now well established that you will have some sort of health insurance; either on your own or provided by your employer. If you are one of those who is happy in the knowledge that your health costs are covered completely you may be in for some surprise.

Who pays for out of hospital costs and loss of Income?

While the typical health insurance policy covers hospitalization costs, there may be significant costs that you may have to incur before you get back to work.  Beyond these costs there may be loss of income while you are recovering.  For the typical salaried person these costs add you very quickly.  You may think that there is very little likely hood of extended period of recuperation. Think again. One out of three Indians will suffer from a critical illness like Cancer, Heart attack, Kidney Failure. In event of such an illness, there will be costs involved that will go well beyond what your regular hospitalization policy will provide.

Enter Critical Illness Insurance Policy

There is a way to get protection or at least compensation in event you are stuck by a critical illness. A critical illness policy provides you with a lump sum Amount in the event that you suffer from one of the listed critical illness. The six most common Critical Illnesses are:

1.       First Heart Attack

2.       Stroke (Cardio Vascular Accident or CVA)

3.       Cancer

4.       Kidney Failure

5.       Major Organ Transplant

6.       Heart By-pass Surgery

Some critical illness policy pay upon diagnosis of the illness. Some of them require you to survive a period of days (typically about 30 days) after diagnosis for payment.

Here is a table of the Best Critical illness policies in India for a male aged 35 for a Sum Insured of 10 lakhs.

Insurer	Annual Premium	Payment Criteria
Bajaj Allianz	3,000	30 days after Diagnosis
Max Bupa	3,089	30 days after Diagnosis
HDFC	3,371	30 days after Diagnosis
Chola	5,698	Upon Diagnosis
Reliance	3,075	30-60 days depending on the illness.
Tata-AIG	8,892	Upon Diagnosis

You can see that policies that pay upon diagnosis are expensive but in my opinion they are worth it.  Also undertake a detailed comparison of Critical Illness Insurance Policies before you buy. Check out all the conditions covered and the policy terms.

Amit Kumar

7 Step guide to selecting the best Health Insurance policy for you.

Okay, so you have decided to be a financially savvy person and agreed that you need health insurance. If you are like the many other people I know, the next steps are pretty vague. Of course there are innumerable agents/advertisements/companies that will project that they have the best solution. But spend a few minutes with me and you are on your way to choosing the best Health Insurance Policy in India for you.

Health Insurance plans in India are available provide compensation for hospitalization plus various optional add-on covers and features. They come in 2 varieties: Family Floater and Individual. As the names suggest, Family Floaters are for families (no points for that) and Individual for individuals (who else!).

STEP 1: FAMILY FLOATER OR INDIVIDUAL?

What decision that confronts you is whether you should buy a family floater policy or an Individual policy?

FAMILY FLOATER POLICY: These policies have a Single Sum Insured that can be used by any member of the family up to any extent within the overall sum insured. If the senior-most member in your family is aged less than 45, consider a family floater policy. If the senior-most member in your family is aged more than 45, buy individual policies with graded cover for the members of your family. The reason for this is in a family floater policy, premium is based on the age of the senior most member who is most likely to fall ill and use the sum insured.  Companies may allow between 2 to 4 children.

INDIVIDUAL POLICY :  An Individual policy is purchased by an individual or by a group of individuals who are part of a family (Spouse, Children, Dependent Parents, and Parents-in-law). Each member has his own Sum Insured. Once he exhausts his sum insured, he cannot claim any further hospitalization expenses.

Family Floater Policy: One Sum Insured shared by All

Individual Policy: Separate Sum Insured for each member. Sum Insured cannot be shared.

STEP 2: SHOULD YOU BUY CRITICAL ILLNESS

CRITICAL ILLNESS COVER: Sedentary lifestyles and stress is causing an increase in critical illnesses like heart and kidney disease, cancer, diabetes, hypertension and so on. If you are less than 35, it makes sense to opt for a Critical Illness cover in your health plan. Critical illness cover would give extra compensation if you are diagnosed with one of these illnesses. This is over and above your sum insured for hospitalization. Critical illness policies are available as add-ons to health insurance policies or a separate Critical illness policies.

STEP 3: MATERNITY COVER:

MATERNITY COVER: If you are in the procreation years you must consider this cover in your health plan. Most companies have a 3-year waiting period before you can claim; hence it makes sense to plan much in advance. Maternity costs are rising and buying insurance is a wise idea. Check out the insurance policies with maternity and new born cover. 

STEP 4: CHECK FOR ADDITIONAL COVERS

ADDITIONAL COVERS:  If one of the insured is a child below 10 or aged, you may want to consider nursing care or convalescence benefits. If you are a firm believer in alternative medicine, you may want to buy AYUSH (Ayurveda/UNANI/Homeopathy) cover. Transport by Ambulance is becoming a necessity in today’s world, and you may want to opt for it. 

STEP 5: CHECK FOR PRE-EXISTING DISEASES

A pre-existing disease means an existing health disorder for which you will take or will need to take treatment. Since these will most certainly lead to hospitalisation claims, insurance companies are careful in selecting clients with pre-existing conditions. Advancing age will imply pre-existing diseases. Most companies will cover pre-existing diseases only after 48 months of continuous coverage. Most companies also insist on pre-acceptance medical tests if the applicant is aged 45 or more. Some companies are more liberal and conduct such tests at 50, or 55 or even 60. You may want to check these out if you wish to avoid medicals: remember such companies will be expensive or even restrict cover offered.

STEP 6: DO YOU HAVE A PREFERRED HOSPITAL

PREFERRED HOSPITAL: Do you wish to take treatment in a particular hospital? Check if this hospital is on an Insurance company’s list. If it is you will probably get cashless treatment, which means that you will not need to pay any cash up front. If your preferred hospital is not on an insurance company’s list, you may have to pay up to 20% of the bill yourself.

STEP 7: COMPARE BEFORE YOU BUY

HOW TO COMPARE AND BUY: Follow this simple process:

·         Log onto www.policylitmus.com

·         Click on Health Insurance Quotes

·         Choose Family Floater or Individual (refer to discussion above for help).

·         Customise your policy by choosing the covers you need.

·         Compare Service standards and Price from the options displayed using the “Sort” Button

·         Select a policy of your choice

·         Buy.

Amit Kumar

Our Health Insurance Policy Explained - Part I

If you have bought a Health Insurance policy, chances are that you are aware that the insurance company will pay your bill for hospitalization of atleast 24 hours.

Just like mobile phones have lots of features and options, health insurance policies too have features that you may not know. Plus there are  features  that may be optional and can be added . If you are buying a policy or have already bought a policy it is possible that:

You may not have features you need, or Have some features that you may rarely need, but have already paid for.

Let us look at some covers that you must necessarily have:

Ambulance Cover: This provides for costs of the ambulance for transportation of the insured patient to the hospital. Insurance companies will limit this to cost to 500-2000 rupees depending on your policy. 

Day Care Procedures: Typically Health Insurance will pay your bills only if you have been admitted in hospital for 24 hours or more. This cover provides for expenses incurred on named surgeries requiring less than 24 hours of hospitalization. These can be expensive procedures, and more and more procedures that previously required hospitalization is moving into this list. This is therefore an important feature to have in your policy. The number of covered procedures varies from company to company; hence it makes sense to check.

Pre-Hospitalization: This cover provides for expenses for a set number of days prior to the period of hospitalization. Surgeries and procedures often require preparatory admission, and this cover provides for those expenses.

Post Hospitality: This cover provides for expenses for a set number of days from the end of the period of hospitalization. Middling to major surgeries require convalescence periods and this is a good cover to have.

The next 2 covers are for a specific life stage: for those people in the procreating years.

Maternity Cover: Most health insurance policies do not ordinarily cover hospitalization for maternity related conditions. If you are in the procreating years it makes sense to opt for this cover. Please remember that there is a waiting period of (usually) 3 years before a claim can be made under this cover. Plan in advance.

New Born Cover: Normally, babies are covered from 3 months onwards. This cover allows a new born to be covered from birth. After 3 months, the baby can be added to the existing policy.

These according to us are the essential covers that your Health Insurance policy must have. In our next blog we will talk about the covers you may want to buy or give a miss depending on your personal situation.

Amit Kumar

All you need to know about Critical Illness Covers

A critical Illness is a life threatening disease that disables you from performing your normal occupation. Various studies have revealed that the incidence of Critical Illnesses have increased manifold. Reasons are many, and these include stress, a sedentary lifestyle, junk food, lack of physical exercise and so on. Nevertheless the fact is that along with the incidence rates, also increasing are the costs of treatment. It makes eminent sense to purchase a Critical Illness (CI) cover from an Insurance Company.

Which Illnesses are Critical:

In India, Critical Illness covers are sold as stand-alone policies by General Insurance companies and as add-on covers (riders) by Life Insurance companies. This means that if you wish to buy a CI cover from a life company, you must have an existing life policy with them.  Most companies (Life or General) cover at least the top 6 Critical Illnesses:

1.       First Heart Attack

2.       Stroke (Cardio Vascular Accident or CVA)

3.       Cancer

4.       Kidney Failure

5.       Major Organ Transplant

6.       Heart By-pass Surgery

Several companies cover more illnesses in varying numbers, even up to 12. They add Alzheimer’s, Burns, specific forms of cancer and so on. Premiums increase based on the number of illnesses covered. While you are the best judge for your requirements, our view is that the first 6 are enough.

Lump sum or Accelerated:

 CI covers are usually fixed benefit covers which means that they pay out a fixed amount on diagnosis, irrespective of the actual expenditure incurred. General Insurance companies follow the lump sum mechanism. However life companies tend to divide CI riders into 2 types:

Lump sum CI Rider: This is the normal mechanism, where on diagnosis, the fixed cover amount is paid out.

Accelerated CI Rider: Under this method, the fixed cover amount is paid out as above, however this amount is reduced from the total life cover on death or maturity.

For example:

Let us have a life policy of 100,000 life cover with a CI rider of 50,000.

·         On the diagnosis of a CI, if you have a lump sum rider, you will immediately be paid Rs 50000. The CI rider is extinguished, the policy continues as usual, and on death or maturity, 100000 will be paid out.

·         On the other hand, if you have an accelerated rider, you will immediately be paid Rs 50000. The CI rider is extinguished, the policy continues as usual, and on death or maturity, the balance 50,000 will be paid out.

It is obvious that Accelerated CI riders are cheaper.

Our View:

We prefer comprehensive coverage hence would advise buying a CI policy from a General Insurance Company or a lump sum CI rider from a Life Insurance Company.

To know which one is best for you, log onto www.policylitmus.com to find comparisons of over 1000+ products from 50 insurance companies.

Policylitmus

Will the Private Insurers Last for Another 25 years.

Life Insurance is a long term contract and like any contract that operates over a long time, the customer asks himself if the provider is going to last for the entire term of his contract. This is a legitimate question as the contract is of no use if the company ceases to exist.

In my opinion this is not a question that should bother you too much.  Let me explain why.

Firstly, the Insurer underwriting your policy cannot carry the whole risk by himself. The insurer in turn sells (re-insures in technical terms) a large part of the risk to a re-insurer.  Re-insuring risk re-distributes the risk among a wider population than is the Insurer’s direct market, thereby reducing the risk to the Insurer. This is similar to a person reducing the risk of the equity market by investing a basket of stocks instead of a select few.  A typical life insurer re-insures about 80% of the risk. Should a claim occur then a proportional amount of the claims will be paid by the re-insurer. 

Secondly IRDA, the Insurance regulator in India, requires the insurers to maintain enough capital to pay for all the risks it has taken on. This is called reserve in technical parlance.  In India insurers are required to maintain a reserve of 1.5 times the total anticipated claims.  This ratio is known as the solvency ratio. Insurers are required at least on an annual basis to review how much claims they would be expected to pay on the business they have taken on.  The total capital they are required to maintain is 1.5 times the anticipated claims amount.  The average solvency ratio in India for Life insurers is 3.4 at the end of FY2012-13.  All regulators watch this ratio like a hawk.

Ironically the life insurer with the lowest solvency ratio (of 1.58) is LIC. But worry not, LIC has a Sovereign guarantee and should LIC be insolvent then our government will dip into the tax payer’s pocket to pay the policyholder’s claims.  Private Insurers with no ability to dip into the tax payer’s pocket maintain a solvency ratio of 1.81 to 6.43. A solvency ratio of higher than 2.0 is taken as adequate capital in almost all major countries worldwide.

Policylitmus

You can check the solvency ratio of Indian Insurers at www.policylitmus.com

Myth of Saving Money in Insurance, Buying Online and using a Broker.

Every day we are inundated with emails and ads from various Insurance companies and Web Aggregator sites that promise to save us big money.  How true are these claims? Do you really save money and is buying online any cheaper than buying from an agent.

First things that one should know is that before an Insurer can sell a product in the market the insurer must file the product with the IRDA, the regulator. In the filling it must specify the pricing for the product. Once the pricing is approved the insurer must stick to that pricing formula. It cannot give a discount to one distributor over another.  For most products that are sold thru multiple channels like Direct from Insurer Online, Web Aggregators and offline distributors like agents and brokers, the price is the same irrespective of where you buy from.

What online comparison sites offer is a price and feature comparison between products of multiple companies. It helps you decide which product is best suited to you. But once you have decided on a product, then the price is the same no matter where you buy from. In this scenario where you buy from is more a matter of convenience and comfort. In cases where the comparison sites offer you a chance to buy polices instantly, you may want to opt for that as it is more convenient.

Are there any instances where you may still want to buy from a Distributor? The answer depends on your own comfort level with buying online. In case of life insurance policies you will need to submit documents for underwriting and may need to undergo a medical test.  If you are too busy to do these things on your own and follow up with the insurer, an agent or broker may be of help.  You don’t pay anything extra for taking their help and don’t save anything if you don’t.  One word of caution before you engage an agent. Make sure he/she is able to give you a choice of companies and products to choose from. Avoid people who always steer you to one product or refuse to give you a choice. Beginning of the year IRDA has allowed Brokers to start selling insurance online. We should start to see to brokers who supplement their physical sales force with online selling. Hopefully this will allow the customers to have best of both worlds.

Having said this there are a few products that are online only.  These are products can only be purchased Online either thru the Insurer directly or other Online distributors.  You cannot buy these products offline thru agents and brokers. Number of such products are growing and as the web sales catches up, you can expect more of such products.

Finally my advice to the customers is to compare insurance policies before buying.  Depending on your comfort level buy online or go thru broker. Better yet look for brokers who have online presence and buy from their site. Should you need manual assistance you can always call upon them for service.

Policylitmus

Stuck with Expensive Term Life Plans. Here is what to do.

Over the Last few Years, you might have seen a number of Insurers come up with very attractive life Insurance plans. The rates have plummeted and Term life Insurance has become very cheap. The question arises for people who are struck in expensive Term Life plans. How do they take advantage of these plans?  If you have bought one of these expensive plans and pay a regular premium they read on.

Let’s say for that you have purchased one of the old fashioned from one of these companies when you were 30 with a policy term of 25 years and for Rs 1 crore Sum Assured.

The premiums that you would pay is something like this:

Insurer	Policy Name	Premium
LIC	Jeevan Amulya II	Rs 22,022
Max Life	Platinum Protect	Rs 21,123
Aviva	Aviva Life Shield Platinum	Rs 14,424

Let’s Say you are now 35. If you are to buy Term Life Insurance now. The rates for 20 year term and 1cr Sum Insured will look something like this.

Insurer/Policy	Claims Payment Record[1]	Annual Premium(With ST)
Reliance(Online Term)	Rejects 7.54% of all claims , Settles 90.00% of claims in 30 days	Rs 9,455
Max Life(Online Term)	Rejects 5.75% of all claims , Settles 80.00% of claims in 30 days	Rs 9,775
Bharti AXA (e-Protect)	Rejects 9.98% of all claims , Settles 90.00% of claims in 30 days	Rs 10,449
BSLI(Easy Protect)	Rejects 13.00% of all claims , Settles 83.00% of claims in 30 days	11,179
TATA-AIA (i-Raksha)	Rejects 12.19% of all claims , Settles 84.00% of claims in 30 days	10,000
Aegon (i-Term)	Rejects 33.49% of all claims , Settles 59.00% of claims in 30 days	10,000

If you have a regular payment term policy then you may consider a switch by simply buying the new policy and stop payment of premium on the old one thereby lapsing that policy. Please note that if you have a single pay option or a limited pay option then, a switch will not make much sense as you have already paid a substantial part of your premium already.

There is one other downside that you should be aware of. If there is a claim on a life policy within two years of purchase then the claim attracts more scrutiny. This is not to say that claim will get rejected but more proof may be required from your side. Also don’t just go by premiums looks at the track record of the Insurer in paying claims specially ones that are less than two years old.

It would be good if Insurers offer to move the customers to their newer products but that won’t happens.  So the customer should look out for a better deal.

PolicyLitmus

---

[1] Based on Public disclosures from FY 2011 – 2013 wherever available.

Are there any plans in India that provide Maternity and New Born covers?

Cost of maternity treatment is rising but until now very few policies provided benefits either for maternity treatment, or complications arising out of maternity, or even cover for the new born baby.

Consider these facts:

1.      Pregnancy related claims have the highest claims frequency (0.726%) of all diseases among females.  

2.      This is particularly high for Females in age group of 26-35 years accounting for about 2% of all claims.

3.      Most of the pregnancy related claims fall in the Rs. 25000- 50000 bracket.

These don’t include out of pocket costs that families have themselves paid. Insurers have now started offering maternity benefits as part of the policy or as an add-on.  Another important thing to note is that is if you don’t have maternity cover, you may be denied treatment for any condition that may arise due to complications during child birth. Hence the cover goes beyond the immediate child birth.

Below is a comparison of polices that offer Maternity and New Born covers. The premiums and benefits shown is for a family of three with the eldest member being 30 years of age opting for five lakhs cover.

Most Maternity covers have a waiting period, so it is better to have this cover well before you plan to start your family.

You can get a complete comparison of Health Insurance polices with Maternity and New Born cover at www.policylitmus.com.

What to do when your Employer provided Healthcare is not enough?

As the health care cost in India rise, lot of employers are cutting back on the amount health cover they provide to employees and their families.  The employer provided health cover is often not adequate to meet the needs of the family. The typical health cover required by a family of four in a tier-1 city is around 5 lakhs.  Most employers on the other hand provide a cover of about 2-3 lakhs.  With a cover of 2-3 lakhs, you have a 60% chance of overshooting this amount in case of hospitalization. What can you do to enhance your cover?

TOP-UP Plans

The best way to address this supplemental need is thru a Top-UP plan(Also known as High-Deductible Plan). This is how a top up plan works. Let’s say you have a cover of 2 Lakhs from your employer under Policy A, but as a family of four in a metro your need is 5 lakhs of cover. You can opt for a top-up policy, say Policy B, that covers you from 2 lakh onwards upto 5 lakhs. This is lot cheaper than buying an additional 3 lakhs mediclaim  cover.

Let’s look at various scenarios in this case.

Scenario 1: Total Claims is 1.5 Lakhs in the year.

In this case your employer policy, Policy A, pays for the costs. You haven’t reached the 2 Lakhs limits so the Top-up Policy doesn’t kick-in.

Scenario 2: Total Claims is 3 Lakhs.

In this case your employer policy, Policy A, pays for the first 2 Lakhs. As you have reached the 2 Lakhs limits, the Top-up Policy kicks-in. The top-up policy now pays for 1 Lakh.

Scenario 3: Total Claims is 7 Lakhs

In this case your employer policy, Policy A, pays for the first 2 Lakhs. As you have reached the 2 Lakhs limits, the Top-up Policy kicks-in. The top-up policy now pays an additional 3 Lakhs taking your total claim amount to 5 lakhs. At this point you have exhausted your top-up option. So you need to pay the remaining 2 lakhs.

Should you have got a higher top-up? Next week I will address the question of how much insurance you need.

Availability

Top up plans are a relatively new phenomenon in the market started about five years back. There are limited choice in terms of the deductible and cover you can choose. Good news is that it is growing.

Insurers offering top up plans today are:

1. United India Insurance Company

2. HDFC ERGO General Insurance

3. Apollo Munich Health Insurance

4. ICICI Lombard General Insurance

5. Bajaj Allianz General Insurance

6. Star Health Insurance

7. Chola Insurance

You can get details of the Top plans and premiums at policylitmus.com

Author: Amitava Deb

6 mistakes to avoid while buying Insurance

Buying insurance is NOT a mistake. It is important to insure, because it purchases peace of mind. Not having insurance is much like taking a family vacation in your car and not carrying a spare tyre. The mere possibility of a flat is enough to ruin your peace of mind. Millions buy insurance, and promptly forget about it: till a claim arises. Many thousands of claims are rejected because of the common mistakes made when buying insurance. Here are the six most common ones.

1.       Not enough research:  A lot of insurance is hard sell; sold and purchased hurriedly. This leaves little time to check the suitability or need. Motivated comparisons, wrong illustrations and untrained distributors add to the confusion. It makes sense to be sure of your need, and then do a little research on what are the best options available. Research the distributor’s competence, competitive products and the companies on offer. Compare Insurance policies before you decide to buy one.

2.       Too much or too little: Buying too much is rare. Most people end up buying too little. What is the appropriate amount of insurance one must have? In the case of property (say motor, or home) it is usually simply the current value of the asset. In case of life, a rule of thumb is ten times your annual income. Health Insurance is more complicated and a lot depends on your lifestyle and ability to pay premiums. Health premiums are eligible for a tax rebate. First check out what the premiums up to the current tax limit will buy for you, adjust thereafter based on your needs.

3.       Not reading the contract/documentation: This is so common as to almost be the rule. We rarely if ever open the document and read the conditions: even a cursory glance will reveal that the contract is written to protect the insurance company. Most insurance contracts have a cooling period; usually a couple of weeks. During this period you can return the contract for a full refund. Read your rights and also ensure that your obligations are met. Many a claim is rejected because some obligation on your side is not fulfilled to the letter.

4.       Inform your family about the details: Insurance protects you and your assets. It makes sense to inform your family about the details. There have been instances where claims have been rejected because of late intimations of loss.

5.       Read the application form and fill it out yourself: Insurance applications forms are complex and carefully worded. It is wise to tell the truth and if in doubt all the details. The more complete the answer the less the scope for a claim rejection. It has happened that the distributor may enter a wrong answer in spite of you wanting to be truthful, hence fill out the form yourself to avoid nasty surprises when filing for a claim.

6.       Not buying from a professional: Insurance agents are a dime a dozen and come in all shapes, sizes, and longevities. This profession has more than its fair share of dodgy, untrained fly-by-night operators. Buy from a professional who is sincere to his profession and cares about your needs.

Made any of these mistakes and suffered the consequences? Made a new mistake? Let us know and we shall share those as well. 

Amit Kumar

6 Steps to take if your life insurance company rejects your claim

Nothing can be more traumatic than an life Insurance claim getting rejected. Primary feelings are a sense of betrayal and helplessness.

But do not lose hope; here is what you can do.

1.       Know your Rights: These are an extract of your rights as a policyholder/claimant:

a.       After you submit a claim, the company shall raise requirements all at once and not in a piece-meal manner, within a period of 15 days of the receipt of the claim.

b.      A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required. If the company requires an investigation, it shall initiate and complete such investigation not later than 6 months from the time of lodging the claim.

c.       Under certain circumstances, companies are liable to pay interest on delayed claim payments. 

It is possible that you may not have in your possession documents that the company insists on your producing. This could also be one reason that the company delays/denies claims. You must inform the company in clear terms that you do not have these documents and the reasons for the same.

2.       Check the date of commencement of the policy: Insurance companies cannot reject claims under policies that have completed more than 2 years from the date of commencement, unless they can prove fraud. It will help to read Sec 45 of the Insurance Act.

3.       Check the Proposal Form: A copy of the proposal/application for insurance is part of the policy document. Check if all information was correctly provided at the time of taking out the policy.

4.       Write to the company: If both of the above are in your favour, write a letter to the company asking for a review of the claim decision. Most companies have committees that review appeals from claimants. These committees generally comprise of senior staff and they tend to have a more “open” view. Make sure your application reaches this committee.

5.       File a complaint with the Ombudsman: If the value of your contract with the insurance company is Rs 20 lacs or less, you can approach the Ombudsman. The Ombudsman is a quasi-judicial body that hears appeals against an insurance company. This service is free and there is no need to appoint lawyers or other legal personnel. Ombudsman awards are binding on the Company.

6.       Approach the Consumer Court: A large number of decisions by consumer courts have helped aggrieved policyholders and claimants.

Of course the choice to approach a regular court always exists, and you may want to seek those remedies.

It is useful to also know the claim paying history of companies before you purchase a policy. Visit us to know more. If you still have a query, please contact us.

Amit Kumar