Why you need health, fire, burglary covers other than life insurance

⇉Why you need health, fire, burglary covers other than life insurance

One must have insurance cover for all risks because to protect against hazards and probability of loss.

What if you are hospitalised and end up with the hospital handing a bill of Rs 5 lakh? What if your car meets an accident and the repairing cost adds up to Rs 2 lakh? What if your shop catches fire? What if some robbery happens at your home? What if something happens to you and your family faces a liability of Rs 50 lakh? Have you given a thought on how you would bear such high costs?

Having insufficient money can get you or your family in serious trouble if you are not able to pay your dues due to insufficient funds. Here is where insurance steps in to protect you. However, when buying insurance, you should consider two things which are - protection and loss recovery.

Vinay Taluja, EVP and Head Cross Sell Landmark Insurance Brokers said one must have insurance cover for all risks because it provides protection from exposure to hazards and probability of loss.

Insurance, by design, is meant to be a risk transfer tool. The risk is defined as the possibility of loss or injury and insurance is concerned with the degree of probability of loss or injury. Through insurance, the insured person transfers risk to the insurance provider. This could be the risk of one’s home being damaged, one’s car getting stolen, incurring steep medical expenses, getting injured in an accident, or even losing one’s life.

Harsh Gahlaut, CEO, FinEdge told Moneycontrol that generally, most people in India have poor understanding of insurance products. This applies to both life and non-life products. “The ‘premium’ paid is the cost that’s borne for offloading this risk to an insurance company. Every individual has the choice of either retaining or transferring these risks, based on his or her free will and objective judgment. The trouble arises when clients attempt to club their savings or investment needs with their insurance needs. They end up between a rock and a hard place, with neither their funds growing at an adequate clip nor their risks adequately mitigated,” said Gahlaut.

With the degree of understanding, let us have a look at some insurance policies available for you to safeguard yourself from several perils and hazards.

Term Insurance Policy

Term Insurance acts as a protective umbrella towards all your financial needs and want. It helps you secure your future at a very nominal cost. For instance, a healthy non-smoker 25-year male can cover his life for a hefty Rs 1 crore by paying an annual premium of as low as Rs 6000 approximately. Term Insurance pays off the sum assured to the nominee in case of demise of the insured person, ensuring a normal living for them in his or her absence. One should not delay the purchase of a term policy if they have dependant members on their earning.

Unit Linked Insurance Policy

ULIP along with term plan is an ideal life insurance portfolio. While term plan offers protection at a nominal cost, ULIP offers a long-term investment opportunity to build the corpus along with some component of protection. “Besides providing insurance, ULIPs are an ideal investment product that also provides tax-saving. It offers, low charges comparable to mutual funds and offers good long-term returns. It also offers the flexibility to choose the asset allocation depending on risk profile. You can set your medium to long-term financial goals around ULIPs as they offer maximum returns over a period of 10-15 years. ULIPS also offer you the flexibility of partial withdraw after 5 continuous policy years, if you have any financial need you can withdraw from your accumulated corpus any time after 5 years," Naval Goel- CEO and Founder of PolicyX.com said.

Disability Insurance Policy

We buy Life Insurance to protect our most valuable asset - income- but ignore disability cover to save the extra premium. This tendency can lead to catastrophic results.

Premanshu Singh, CEO of Coverfox.com told Moneycontrol that a permanent disability can lead to a loss of income, as an existing life cover comes into force only on death, thus, leaving you in a bind.

“Disability cover plays an important role in such a situation. Hence, one must buy a term plan with an in-built accidental death and disability benefit or total permanent disability benefit to cover this risk. You can even choose an appropriate rider for the same at the time of buying the policy or on the respective policy anniversary,” he said.

Health Insurance Policy

Today’s fast-paced, stressful life and growing pollution is leading to many health concerns for all Indians. Heart diseases, respiratory diseases, diabetes and cancer have become the leading killers in India. Rising health care costs and double-digit inflation in the health sector is making it financially difficult for us to get proper treatment.

“Doctor’s fees, hospitalization expenses, treatment cost, medical consumables and the cost of medicines is burning a deep hole in an average Indian’s pocket. All these factors have made buying a Health Insurance a must. A health insurance policy is an excellent means of protecting one’s savings from the axe of medical bills and securing good medical attention. And buying the right cover is the most important thing as you would want full coverage in the times of needs,” said Premanshu Singh.

Fire insurance policy

Fire insurance provides cover against property damages caused due to fire. It covers expenses incurred for the reconstruction, replacement and repair of the insured property. “The standard fire policy will not cover loss or damage caused by war, civil war and kindred perils; nuclear risks, or pollution or contamination. The fire policy covers only material damage. Any consequential losses— loss of earnings, loss by delay, loss of market or other indirect loss or damage of any kind—will have to be covered under a separate consequential loss policy,” said Navin Chandani, Chief Business Development Officer, BankBazaar.com

Burglary insurance policy

Burglary insurance typically protects from loss or damage due to burglary or housebreaking. It is a good precaution for those who go to work leaving the house unattended. Usually, the policy pays actual loss/damage to the insured property caused by burglary/house breaking subject to the limit of sum insured. “Unless specifically mentioned in the policy, acts of theft like shoplifting, items stolen from a safe using a key or duplicate key, etc., will not be covered under the burglary insurance. You should also check the policy clauses in case the insured property is unoccupied for a certain period of time,” added Chandani.

Motor insurance Policy

It is mandatory to have a Third Party Liability (TPL) insurance coverage for your vehicle in India. The TPL policy covers you against the legal implications of an accident caused by you. In case you cause an accident that any damage to the life and property of others, the liability of death, injury or damage to property towards a third party is borne by the insurance company. Having the right level of cover also provides financial protection in the event of your vehicle being damaged. It can also provide financial support if your car is stolen, vandalised or destroyed.

“Considering high incidences of own damages in the Indian context, it is always prudent to avail a comprehensive policy over the mandated third party policy. Motor insurance will not only cover loss or damage caused to the vehicle when driven by someone without a valid driving licence. It will also not cover loss or damage if the driver is driving under the influence of drugs or alcohol,” said Chandani.

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Mega healthcare plan to boost India's insurance sector

⇉Mega healthcare plan to boost India's insurance sector

Besides, the government Budget proposal to merge 3 public-sector insurance companies should reduce competition and facilitate improved underwriting discipline in the domestic market. 

The healthcare scheme announced in the Budget will be a "game changer" for India's health industry and generate substantial growth in insurers' premiums, S&P Global Ratings said today. 

The insurance sector is slated to get a boost once the NHPS scheme is implemented as it reflects the government's intent to expand the country's protection umbrella, and could have far-reaching implications for the domestic insurance sector, it said. 

"We believe the proposal has the potential to be a game changer for the health industry based on its sheer coverage size and scope," S&P said. 

"An effectively executed National Health Protection Scheme (NHPS) will bring coverage to 40 per cent of the population and generate substantial growth in health insurers' premiums and increased cross-selling opportunities," it added. 

The scheme, which would be the world's largest government healthcare programme, was announced earlier this month in .the Union Budget 2018-19 for providing medical cover of up to Rs 5 lakh to over 10 crore poor and vulnerable families, constituting 40 per cent of India's total population. 

"We expect insurers to introduce a range of new products with healthier coverage to capitalise on increased tax incentives amid rising medical inflation," it added. 

Besides, the government's Budget proposal to merge three public-sector insurance companies should reduce competition and facilitate improved underwriting discipline in the domestic market. 

The 3 insurers -- United India Insurance, National Insurance and the Oriental Insurance -- together contribute around 30 per cent of market share of the non-life-insurance market in India, with a premium book of more than Rs 40,000 crore. 

"A merger of three big public insurers in India will improve the sector's overall profitability by reducing competition. In our view, less competition will facilitate improved underwriting discipline, enhanced risk retention, and better managed solvency levels in the Indian insurance market," S&P Global Ratings credit analyst Trupti Kulkarni said. 

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Insurance, not loan waivers, can pull the poor out of debt trap

⇉Insurance, not loan waivers, can pull the poor out of debt trap

The poor in developing countries often find themselves in debt traps because of shocks to incomes. Insurance coverage may be a better solution to lessen their dependence on moneylenders

    Debt waivers need not always pull the poor out of debt traps, according to research by Dean Karlan, professor at Northwestern University, and co-authors. They conducted field experiments in India and the Philippines, wherein selected small-scale entrepreneurs had their existing debt paid off. Some of them were also given financial education. The aim was to free them of the debt trap. However, the researchers found that most of the subjects went back to borrowing at high rates within six weeks. The authors ruled out the possibility that sustained borrowing is voluntary and profit-maximizing. Instead, they found that income shocks and unavoidable consumption often forced their subjects to return to borrowing. The authors suggest that insurance against income shocks, rather than ad hoc debt relief, may be a better way to fight the debt trap.

The probability of college-educated men in the US finding high-paying jobs has declined since the 1980s while it has increased for women, according to a new National Bureau of Economic Research (NBER) paper authored by Guido Matias Cortes, assistant professor at York University, and co-authors.

By high-paying jobs, the authors refer to jobs in the top 25% bracket of occupations or jobs that require cognitive skills such as problem-solving. They argue that the improved chances for women landing such jobs is partly owing to the increased demand for social skills at the workplace. Research indicates women might be better at skills such as communication and working together. Thus, the percentage of college-educated women holding such high-paying jobs has increased from 54.2% in 1980 to 57.8% in 2014. At the same time, the percentage of male graduates employed in such jobs dropped from 66.2% to 61.4%. The rise in probability of women graduates finding high-paying jobs is all the more remarkable because the supply of women graduates rose at a faster pace than men.

Personality traits of managers can have a large impact on the fortunes of firms, argues a new research paper which examines micro, small and medium firms in Vietnam. Smriti Sharma and Finn Tarp, researchers with the United Nations University’s World Institute for Development Economics Research, find that managers with higher “locus of control” and innovativeness are associated with higher revenue for firms.

“Locus of control” is a psychological concept which indicates how much individuals believe that outcomes in their life are within their control.

On the other hand, risk aversion is positively correlated with the adoption of safety measures, although it is also associated with lower revenue.

Contrary to conventional belief, banks are not more opaque than other firms, suggests new research by Fabrizio Spargoli and Christian Upper from the Rotterdam School of Management. They compared data on returns from trade in stocks by corporate insiders in US banks with those by other firms.

If banks were indeed opaque, then stock purchases by senior bank officials should have been followed by rise in equity prices. Conversely, insider stock sales should be followed by a drop in stock prices. In other words, if banks are opaque, then bank officials would have better information on the future performance of their institutions than outside investors. However, authors’ analysis suggests that banks are no more opaque than other firms. Specifically, stock sales by bank insiders were not followed by negative stock returns.

Central banks will most likely continue to have an important role even in the age of digital money, argued Agustín Carstens, general manager, Bank for International Settlements (BIS) in a recent speech. BIS is the bank of central banks. He cited history to argue that money needs to have a basis of trust, supported by some credible institution. To illustrate, before the Federal Reserve was created in the US in 1913, the monetary system was often rocked by crises of credibility, as between 1837 and 1863 when many banks issued their own currency. Specifically, he cast doubts on the efficiency and safety of the distributed ledger technology, which forms the basis for cryptocurrencies. He predicts that credible money will continue to arise from central bank decisions taken in public interest.

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Poor getting insurance for less than price of tea, says PM Modi

⇉Poor getting insurance for less than price of tea, says PM Modi

       Prime Minister Narendra Modi on Sunday proclaimed that the government provides insurance cover to the poor for less than the price of tea- at a premium of only 90 paise per day and Re 1 per month.

Referring to the 'Pradhan Mantri Suraksha Bima Yojana' and 'Pradhan Mantri Jeevan Jyoti Bima Yojana' in his address to the Indian community in Oman, PM Modi said, "Today the poor are being given life insurance and safety insurance at a premium if 90 paise per day and Re 1 per month. I am a tea seller, so I know that 90 paise doesn't even get you tea."

Prime Minister Modi also elaborated on several other schemes launched by the government for the welfare of the poorer sections of the society, one of them being the most ambitious healthcare assurance scheme launched in the latest budget, Ayushman Bharat Yojana.
The Prime Minister further informed that next generation infrastructure is being developed in the country keeping in mind the needs of 21st century.
"We are working towards making transportation sector co-dependent. Highway, airway, railway and waterway are being integrated together according to each other' needs," he added.

The Prime Minister also said the country is now on its path to realizing the vision of new India where "even the poorest person gets the opportunity to progress, and is able to dream and achieve that dream."
PM Modi arrived in Muscat on Sunday, which is the last leg of his four-nation tour.

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How to protect your retirement with insurance

⇉How to protect your retirement with insurance

Many people do not buy insurance for their retirement years. However, as insurance is a cover for unexpected events; it is going to become more crucial to us especially after the earning phase is over

The common wisdom is that insurance in retirement is a waste of money. But there are situations where you may need insurance to protect your financial security. The relative importance of different categories of insurance is likely to be different compared to your working years, and it is important to assess your own circumstances carefully to determine your need for insurance in retirement. Here are some circumstances where insurance is recommended.

For income replacement

Life insurance may be relevant in retirement if income from a second career forms a significant portion of the retiral income. This is typically the case in the early years of retirement. It is important for the person earning the income to have life insurance, so that the income being earned in retirement is compensated in the event of death. In some cases, the retirement income may be from a pension, which may reduce on the death of the primary pensioner. Life insurance will help replace the lost pension so that the household can continue to manage its expenses. If you have financial responsibility of your children or grandchildren even in retirement, it becomes necessary to have adequate life insurance to meet their needs when you are not there to take care. Again, if you are paying off a large debt in retirement, say a house loan taken late in the earning years, you may consider an insurance policy to the extent of the outstanding loan so that your family is not left with that obligation in the event of your death.

To offset health costs

Health-related costs have the highest potential to derail your retirement finances. It is good to be prepared for such expenses, even if there are no health concerns at the start of retirement. Make health costs an item you prioritize, when determining the costs to be met in retirement and the corpus you have to accumulate in your working years. Given the uncertainties associated with health and health costs, insurance is an efficient way to meet these expenses in a planned way. However, obtaining health insurance later in life may be difficult and the costs are likely to be higher as you grow older and health issues crop up. One way is to lock yourself into a health insurance policy when you are healthy, so that you are not rejected on grounds of health conditions, or the existing conditions are excluded, or you are charged a prohibitively high premium when you may need insurance. Do this as preparation for retirement even when you are covered by an employer-provided insurance in your working years. Select the insurance policy that takes care of your specific health needs. For example, if there are existing health conditions, then look for policies that have a lower cooling-off or exclusion period, or that may cover pre-existing conditions with lower cooling-off period with a co-payment option. If you need procedures such as dialysis, which require day-stays in hospital, then look for policies that cover multiple hospital admissions of less than 24 hours. Use top-ups and riders to make the most cost-effective and suitable health package for your needs. Personal accident insurance is something you need to consider if you intend to contribute to retirement income, with a second career in retirement. In the event of an accident, such policies compensate you for the period you are unable to work and earn an income, and to meet any out-of-pocket expenses that may not be covered by your broader health insurance policy. Long-term care is another area of old age that falls under the health-needs umbrella. Make sure your corpus provides for the costs associated with providing care and assistance at the stage when you may not be able to take care of all daily-living activities on your own.

For leaving an inheritance

Life insurance can be a tool for estate planning and managing the costs related to end of life. Life insurance policies can be used as a means to transfer wealth to the next generation, for individuals with a low risk appetite. Premiums are paid through the life of the insured and on their death, the proceeds go to the beneficiaries. Insurance policies allow the person to plan the bequeaths well ahead, accumulate the wealth over a long term and pass on the corpus. There are tax benefits at the time of paying the premiums and the corpus is tax-free too. This boosts the returns from this source, as compared to other investments that are typically used to accumulate wealth for the next generation, such as securities and real estate; where there may be capital gains and other taxes. Remember, life insurance should be part of the overall wealth transfer strategy and should be used in conjunction with other assets. The proceeds from a life insurance policy provide stability and liquidity to the inheritance while the other assets may be illiquid and have volatile values. The effectiveness of using life insurance for inheritance planning will also depend on the cost of the cover. To get the best premiums, it is important to plan ahead and make an early entry into insurance products. Make sure that you don’t overreach. If the premiums are too high for your retirement income to bear, you may not be able to service the policy and lose the benefit for which you have paid for. Another use of life insurance policy is to meet expenses related to care and medical expenses not covered by health insurance at the end of a person’s life. The beneficiaries of the policy will be responsible for meeting these expenses as they arise, and on the death of the person they will be compensated from the proceeds from the policy.

To protect assets

You need insurance to protect your assets. This includes auto insurance to compensate for any damage to your vehicle, along with third-party liability coverage to protect you from any claims against you as a result of a motor accident. A third-party liability insurance is essential to ensure that your other assets are not put at risk by a liability claim, and it is also mandatory for motor vehicles. Your home, typically your biggest asset in retirement, requires protection that an insurance policy can provide. The contents of the house can also be insured for a small sum and should be considered to protect against theft, burglary and destruction.

Your need for insurance in retirement will be different from the pre-retirement stage and keep evolving through the retirement years. For example, the life insurance policy intended to protect the income for a spouse or to support a loan being paid off is no longer relevant if the spouse passes away or the loan is paid off.

Just as you would periodically assess your income needs and make changes to your investments accordingly, you should monitor your insurance needs periodically to ensure that you have the protection you need at the most efficient cost possible.

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Health insurance: Elderly can cheer

⇉Health insurance: Elderly can cheer

With senior citizens now being able to claim tax deduction benefit of 50,000 for any medical insurance and deduction of 1,00,000 for critical illnesses, healthcare experts say the elderly in Telangana stand to benefit.

More than 40% of senior citizens from the city and elsewhere in the districts do not have access to proper health facilities and many do not have health insurance.

The Union budget 2018-19 has enhanced deduction for medical insurance under Section 80 D for senior citizens from 30,000 to 50,000. To further protect senior citizens from rising medical costs, the deduction limit for critical specified illness has been enhanced to 1,00,000. "This would definitely ease tax compliance for our elders who would be hassled by excess deductions. They would be forced to file tax return just to claim refund of such excess TDS," said Parizad Sirwalla, partner and head, Global Mobility Services - tax, KPMG India.

In another development, a National Health Protection Scheme to provide health insurance cover of 5 lakh per family per year has been announced. "This insurance policy will help people below poverty line to go to private hospitals and get treatment without worrying about costs or waiting time like in government hospitals," said Dr. Anil Krishna, MD, MaxCure group of Hospitals.

But funds for scheme are less. "For National Health Protection Scheme, a token allocation of only 2,000 crore has been made... With 10 crore families, nearly 13,000 crore will be the possible cost," said a official from state health department.

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Why one needs third-party motor insurance

⇉Why one needs third-party motor insurance

Third-party insurance offers coverage that protects against claims of damages or losses incurred by someone who is not the insured.  

According to the Motor Vehicles Act, 1988, 'third-party insurance' is a statutory requirement. A third-party motor insurance policy covers fiscal liability incurred by the owner of a car in the event of unforeseen demise or permanent disability of the third party, which was crashed by the vehicle of the policy holder in an accident. 

The Insurance Regulatory and Development Authority (IRDA) of India computes the damages.

Third Party Insurance comes handy when your vehicle hits another vehicle, the victim is allowed to register a case claiming for compensation. It covers the insured vehicles in case any liability claim arises out of bodily injury, property damage, or death of a person. 

Third-party property damage cover is limited up to 7 lakhs. 

Moreover, sticking to third-party liability insurance is a wise idea if you own an old car and don’t want to spend your hard-earned money on it.

According to the Motor Vehicles Act, plying an uninsured vehicle on Indian roads is an offence. Under the third-party car insurance, the insurer compensates any legal liabilities claimed by the other party, in case the insured vehicle is at fault. 

This rule is applies for two-wheelers as well. Non-compliance may lead to the enforcement of legal punishment, which includes hefty fines, and trial.

'Disclaimer: This story is for informational purposes only and should not be taken as investment advice.'

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