A good financial planner will tell you that insurance is the first step when it comes to financial planning. First it is important to have your risks covered, even before starting your investment journey. However, when it comes to insurance - life insurance, health insurance and other general insurance products, a one-size-fits-all strategy does not work. Each person’s insurance needs are very different from the other and the first step in buying insurance is to analyse what kinds of insurance you need.
Further, in the last few years, the life and health insurance industry has seen a lot of changes. That said, today many tend to look at insurance as a product that helps to save taxes and some are not sure whether they should buy insurance, which is a mix of insurance and investment. Here, we answer some of the most important queries that our readers have, so that you can make the right decisions on time.
1. What are the recent guidelines as per the Insurance Regulatory and Development Authority of India (IRDAI) on health insurance?
IRDAI recently released guidelines pertaining to health insurance policies. They primarily focus on making the health insurance policies more standardised and customer centric. Some of the key changes are that they have reduced the list of non-payable items to only 68, a list of standard exclusions have been given, which all health insurance policies must maintain verbatim in all their policy wordings. The guidelines have also included a list of procedure that the insurers must cover. Apart from these there are other changes such as revised definition of a Pre-Existing Disease (PED), option to permanently exclude some specific diseases, moratorium period of eight years.
(Sanjay Datta, Chief-Underwriting, Claims, Reinsurance and Actuary, ICICI Lombard GIC)
2. What would be the ideal sum insured for a family floater plan?
The right size of cover depends on your present and future health care needs, location (medical costs are different in metro and non-metro cities), number of members in family and affordability. Factors like co-pay, room rent capping and sublimit must be taken into consideration as they impact the total coverage. Health exigencies can happen anytime, and hence it is highly recommended to buy a health insurance cover at an early age. As age increases, the premiums for health insurance increases but more importantly the probability of contracting lifestyle conditions also increase, making it difficult to buy a medical plan at that time given the sub optimal health condition.
3. How often can one change the health insurance provider?
There is no specific limit, as to how many times a customer can switch from one insurance provider to another. They have an option of switching at the time of each renewal. Usually, customers port out of the insurance if they are dissatisfied with the product or the services offered.
4. Should I include my parents to family floater plan or buy a separate plan for senior citizen?
Family floater policy allows you to cover your family members under a single policy wherein the sum insured ‘floats’ across all the members. The definition of family under the policy includes proposer, her spouse and two kids. However, parents can be covered under a separate floater plan. Hence, I would advise a person to buy a separate parental floater policy.
One of the things a person needs to consider while buying a floater policy is the premium is determined based on the eldest member. Customised plans for senior citizens are designed to cover the exigencies of silver years. I would recommend that a person reviews all the covers prior to deciding the plan to make an informed decision.
(Sasikumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance)
5. What benefits are available in health insurance portability?
Portability under health insurance means you can change your policy from one insurance company to another. One of the major benefits,according to me. is that a person gets seamless continuity cover as one doesn’t have to lose the benefits accumulated in terms of pre-existing diseases or waiting period when they switch to another company.
Additionally, portability also allows a person to move to a better product, which also provides better services. This helps in a big way.
6. Should I buy critical illness plan separately or a combo health insurance plan?
I feel there is no comparison ground between the two. While a critical illness policy is a benefit policy, a combo health insurance plan is a package policy that may offer a combination of indemnity-based cover, personal accident cover, hospital cash cover and even critical illness cover under one product. I feel one must have both - an indemnity-based health insurance policy that covers you for hospitalisation expenses in case of medical exigencies and a critical illness policy that offers a lump sum amount in case diagnosed with a listed ailment under the policy, which helps in recovery. Hence it is advisable to opt for a package plan taking care of all the health risks.
Considering medical inflation, I believe one must have an adequate coverage while buying any kind of health insurance policy. You need to opt for an appropriate sum insured and ensure that the coverage offered matches your requirement.
7.ULIP or retirement plan - which one is an ideal option for regular income after retirement and why?
Retirement is a need, which can be met financially through various life insurance solutions like Unit-Linked Insurance Plans (ULIPs) and traditional plans. If one is looking to have regular and guaranteed income post retirement, it is best to opt for a traditional plan which is meant for certain years and offers survival benefit. Such plans will provide regular income until the policyholder survives and can take care of the retirement worries. On the other hand, ULIPs are a good avenue to create adequate corpus for one’s retirement through which a stream of income can be generated. It is best to plan one’s retirement with ULIP if the person starts planning early. Also, as an alternative to a traditional retirement plan, a whole ULIP can be taken and regular income can be drawn through partial withdrawals from the ULIP account. However, in this case the income would not be guaranteed and will vary depending on the performance of the financial market. Therefore, in case of sub-par performance of the market, the fund value under ULIP might not sustain for whole life.
(Anil Kumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance)
8. Is it possible to increase my life insurance sum assured to my existing policy? Any options available to increase the sum assured?
Usually, the sum assured for life insurance policies gets locked at the time of the purchase and it is not possible to increase the sum assured for the same policy.
However, some life insurance products offer a built-in feature called life stage protection, which gives flexibility to the policyholders to increase sum assured at specific milestones of their lives like marriage and childbirth. One can opt for this option within six months of an event occurrence or at the prescribed cut-off age. Some products also offer the increasing sum assured benefit wherein, the sum assured increases by 5-10 per cent annually and is an effective tool against inflation.
(Anil Kumar Singh)
9. What are the recent guidelines as per IRDA on life insurance?
a. As per recent IRDA guidelines, with effect from December 1, 2019, all life insurance companies are asked to send benefit illustration with each and every life insurance policy.
b. These benefit illustrations will have detailed information of returns during or at the maturity of the policy, which customers can get during or at the maturity of the policy.
c. These benefit illustrations will be for rate of returns or four per cent and eight per cent.
(Anik Jain, Co-founder and CEO, Symbo India Insurance Broking)
10. Term insurance or return of premium plan - which is a better option and why?
Term insurance is the pure death plan. If a policyholder dies during the policy tenure, the nominee gets the money (sum assured of the policy) of the term insurance but if customer survives the policy tenure in pure term insurance plan, the customer gets nothing.
Whereas return of premium plan provides same coverage at the time of death of the policyholder during the policy tenure. But if customer survives the policy tenure, with return of premium rider, the policyholder gets the entire premium paid during the policy tenure back.
a. Unlike term plans, where the benefit is sum insured or nothing, in return of premium plans, the benefits payable at death (sum assured) and maturity (return of premium) are fixed. Therefore, premiums for these plans are higher
b. A return of premium plan charges significantly higher than normal term plan. A policyholder should evaluate the trade-off between getting a return of premium versus investing the differential premium in alternate investment opportunities.