Insurance 101 « Archives of Policy Mantra Blog

Category Archives: Insurance 101

Everything About Cashless Treatment

Posted on May 6, 2013 by PolicyMantra Team

Cashless Treatment

We cannot always predict the future episodes of life but if we are alert we can surely prepare ourselves with whatever resources we have. Insurance is one such mode which helps us deal with future financial uncertainties better. It works as a protective layer in times of uncertainties. One such form of insurance cover is health insurance, which safeguards individual in times of medical emergencies.

Medical emergencies cannot be estimated and so at times, the cost of treatment, hospitalization and medicines could wipe off ones entire savings. With financial limitations one is also deprived of quality medical treatment. Health insurance works as a medium of relief to individuals since such a cover ensures proper medical helps in times of need. To be able to receive hassle free treatment, health insurance policies comprise of a benefit known as CASHLESS TREATMENT. This works as an added benefit to the medical cover.

How does Cashless Mediclaim Work?

Cashless treatment can be availed when the insured gets the treatment done from a medical centre or hospital which is listed on the insurance company’s empanelled list. Under this benefit, one does not need to settle the hospital bills with the hospital himself. The insurance company itself or sometimes represented by the TPA (Third party Administrators) covering the individual co-ordinates with the hospital and settles the bills.

The health insurance companies ties-up with the hospitals after negotiating the rates and medical support quality, such hospitals are called networked hospitals. Cashless facilities can be availed in these hospitals only.

The Third Party Administrators represent the insurance companies and are responsible for settling the claims both to be reimbursed and cashless. For an individual to be able to avail the cashless facility, the TPA is the final decision making authority.

Process of availing Cashless facility:

Pre Authorization Form: The insured is required to fill this form available either at the hospital’s help desk or the TPA website. Based on the detailed information filled in this form the TPA decides whether the insured is entitled to cashless claim.

Planned Hospitalization:

In case of planned hospitalization, individual is required to fill in the formalities 3-4 days before the hospitalization. The insured should take care of a few things before hospitalization:

Insured should check the list of networked hospitals offered by the insurance company to select the most convenient one.
Present the filled authorization form at the hospital as a part of communication to the TPA.
The TPA on receiving the form either accepts or rejects the cashless claim and inform the individual and hospital along with the amount approved in case the claim is accepted.

Emergency Hospitalization:

In case of emergency hospitalization, the procedure to avail cashless treatment should be started within 24 hours from the time of hospitalization by producing the health insurance card. In this case, the procedure works on priority basis and so settlement does not take more than 6 hours.

What happens if the cost of treatment exceeds the approved sum?

The TPA approves only a part of the expenses incurred for the treatment. It is only when the complete bills along with discharge summary, all reports are received from the hospital, the TPA settles the entire amount.

Reasons for the claims to be rejected:

There could be cases when the claims could be rejected by the TPA. A few cases could be:

The disease for which the insured is hospitalized is not cover by the insurance policy opted for.
If the insured has exhausted the total sum assured approved for the policy year.
The pre authorization form does not provide all required details.

Expenses not occurred under cashless facility:

There are a few non medical expenses which are not covered under the cashless facility:

Registration, admission fee.
Charges on the food.
Ambulance charges.
Documentation charges, service charges.
Toiletries and medical support like nebulizers, oxygen masks etc.

Highlights of Cashless Facility:

This facility is available only in case of networked hospitals.
Individual is required to submit all medical documents along with discharge summary, total medical bill before discharge from the hospital.
Cashless facility can be availed depending on the terms and conditions of the insurance company.

Categories: Articles, Health Insurance, Insurance 101 | Tags: Ambulance Charges, Cashless Mediclaim, Cashless Treatment, Health Insurance, Network Hospitals, Planned Hospitalisation, Third Party Administrators

‘Pay As You Go’ Car Insurance: Drive Less and Pay Less

Posted on April 16, 2013 by PolicyMantra Team

No Comments

Many times you might have felt frustrated to shell out premiums for your car insurance when it barely stirred out of the driveway. This situation is likely to change as insurance companies are about to launch ‘pay as you go’ car insurance policies.

Insurance companies are contemplating to introduce in ‘pay as you go’ car insurance concept in India. This concept is already prevalent in developed nations like USA, UK, Japan etc. India is also about to join them.

Indian general insurance companies have launched pilots, but they are yet to launch the product.

This usage based concept will not only reward good behavior drivers but also encourage bad drivers to adopt the good driving behavior.

As per the pay-as-you-drive concept insurers will give incentive to the good drivers and less frequent users by making them pay lower premium for their motor insurance policies. And this usage-based insurance solution will also ensure lower claim ratio for the insurance companies.

On the other hand drivers who clock higher mileage or have bad -driving behavior are more prone risk of claims will have to pay more premiums.

It is a rewards based programme with no penalties. ‘Pay as you go’ works well for those who don’t drive that much and have a good driving record. It encourages you to clock fewer miles and avoid high risk driving.

Under this concept premiums are computed on the basis of your make and model of your car, location and distance that you drive. It is different from your current car insurance policies as currently car insurance premiums are computed on the basis of your driving history, while ‘pay as you go’ insurance premiums are meant to reflect your current driving habits. In this concept, age usually does not impact your premium.

This insurance product will work much like as your pre-paid mobile phone connection.

Under this model insurance company will fit a GPS device in your vehicle which will track the distance actually traveled. It will also collect data pertaining to average speed, type of roads on which it runs and the driving pattern. The premium will be based on all these parameters.

Customers opting for this insurance product will be asked to shell out an advance premium and indicate the number of kilometers they were likely to drive during the period of the cover. Once the originally indicated distance is traveled, customers will have the option of topping it up further. And if the distance traveled is less, the customer is refunded the extra premium.

If there is an accident during the cover period, the insurer will pay the sum assured for repairs.

The device will also help to bring down the claims arising out of the theft of the vehicle as this device will help to track the vehicle in the case of theft.

However, this system has received mixed response globally. Under this model, a GPS device is fitted inside customer’s cars which constantly fed back data on where and when they were driving using satellite technology. This is found too intrusive by some people.

Some people argue that saving money on car insurance shouldn’t require you to sacrifice your right to privacy.

It is also a major actuarial challenge for insurers, as they take on a lot of risk basing your premium on current behavior instead of past profile.

Even if the privacy was not a concern, ‘pay as you go’ system is limited in the data at its disposal. Its likely to look at all mileage as the same instead of distinguishing between city and highway driving and use speeding as the main metric for bad driving, instead of swerving, road rage and other risky behavior that can’t be detected by such a system.

However, if you do not drive that much and have a good driving record, you can get some substantial savings on your car insurance premiums with ‘pay as you go’ car insurance policy but if not then taking this policy will be a costly issue.

Categories: Articles, Car Insurance, Insurance 101, News | Tags: Car Insurance, GPS, Pay As You Go, Privacy

Things To Know About Motor Insurance Claim Process

Posted on February 3, 2013 by PolicyMantra Team

No Comments

As per Motor vehicle act, 1988, it is mandatory for every vehicle-owner to get his vehicle insured or else he can be penalized. Getting your vehicle insured is mandatory and it is also equally important to understand the motor insurance claim process so in the event of any accident you can get your claim fast and smoothly.

For what kind of losses one can file a claim under a motor insurance policy?

Third party losses: If some one else has got bodily injuries by your insured vehicle or your vehicle has damaged some one’s property, then it is considered as third party loss. Such losses are covered by third-party cover.

Damage to your own vehicle: If your vehicle is damaged in an accident or it is stolen then such losses are covered under own damage cover. This cover is optional and you can get this cover only if you have comprehensive motor insurance policy.

What are the things that one should do immediately after an accident occurs?

Third Party claim: In the case of third party claim, one should immediately inform the police and insurance company about the accident. And if you’re the victim then you should obtain the insurance detail of that vehicle and make intimation to the insurer of that vehicle.

Theft claim: In case of theft claim you should immediately inform the police and insurance company and along with it you should also inform it to transport department.

Own damage claim: In the event of an own damage claim i.e. if your own insured vehicle gets damaged in an accident, you should inform the police as well as the insurance company so that it can send a surveyor to assess the loss.

Do not move the vehicle from the accident spot without the permission of the police and insurance company.

Do insurance companies offer cashless facility?

Yes, insurance companies offer cashless facility, provided you go to there network garages. Going to your insurer’s network garage is also hassle free option as you don’t have to take the hassle of documentation.

But if you don’t want to go to network garages of your insurer and want to go to your preferred garage then you also have the option of reimbursement. After getting your vehicle repaired you can get your expenses reimbursed by insurance company, for that you have to submit bills along with all other required documents.

What are the documents required while filing a claim?

Though there may be specific document requirement by specific insurance companies but in general all insurers require some documents such as:-

For accident claims

Claim form duly filled
Copy of Registration Certificate (RC)
Copy of driving license of the person who was driving the vehicle at the time of the accident
Photo copy of first two pages of policy document
Copy of First Information Report (FIR)
Original repair invoice, payment receipt while for cashless garage only repair invoice

Theft claim

Claim form duly filled
Copy of Registration Certificate (RC)
All the original keys of the vehicle
Copy of driving license
Copy of first two pages of policy document
Copy of First Information Report (FIR)
RTO transfer papers
Final report or No Trace report (if police does not able to find your vehicle within 90 days of the theft then it issues a undertaking that yet they have to find your vehicle)

For third party claim

Duly filled claim form
Copy of First Information Report (FIR)
Copy of driving license
Copy of first two pages of policy document
Copy of Registration Certificate (RC)

Does policyholder have to bear any expenses on his own?

Yes, policyholder has to bear certain cost on their own:-

Amount of depreciation
Reasonable value of salvage (if not repaired at the network garage of insurer)
Voluntarily and compulsory deductibles
Any compulsorily excess levied by the insurer

What will happen if an accident takes place outside the city where policy was issued?

A motor insurance policy remains in force throughout the country. Hence, in such circumstances also you can file a claim.

Will filing a claim will affect renewal?

Yes, if you file a claim then you will lose the entire no-claim bonus that you have accrued.

Should claim be filed for minor accident as well?

It is not advisable to file a claim for small loss because every motor insurance policy has some deductibles (deductible is the part of claim that you need to pay on your own before insurer pay your claim). Hence, before filing a claim for a small amount, first assess what amount you have to pay as deductible and how much no-claim bonus you can get if you don’t make a claim and only if it is worth to file a claim then make a claim.

It is advisable that as soon as you receive the policy document, go through the procedure and documentation requirements of the claim thoroughly, rather than to wait for the claim to arise.

Categories: Articles, Car Insurance, Insurance 101, News | Tags: Auto Insurance, Car Insurance, Cashless Claim, Claim Form, Copy of Registration Certificate, Deductibles, Motor Insurance Policy, Motor Vehicle Act 1988, No Claim Bonus, Own Damage Policy, Theft Claim, Third Party Claim, Third Party Losses

Check for Fake Motor Insurance Policies

Posted on February 1, 2013 by Akanksha

No Comments

Insurance frauds have been prevalent over the years and fact is that it can’t be completely eliminated. Hence, it becomes imperative for you to verify that motor insurance policy that you have purchased is genuine or not. Or otherwise if you come to know about it at the time of claim or a mishap then it would be very disheartening. Some might realize it after the theft of the vehicle that they had been paying premium for over a number of years expecting to benefit from it.

However, you can reduce such incidences with little caution. Some of the ways to know whether your motor insurance policy is genuine or not are:-

Contact your insurer: This is the easiest and simplest way to check whether the policy handed to you is correct or not. You can contact the insurer by sending an email to the customer care or calling their toll free numbers, which would be mentioned on the policy document. In case if the toll free number is not available, you can visit the nearest branch office.

Ask for a receipt: Always insist on premium payment receipt. Some companies mention the same on the policy document (under premium payment details) but they also provide a separate premium payment receipt, if asked for. It is always advisable to ask for premium payment receipt in case you pay by cash. Verify whether the details mentioned on the receipt are correct, such as details of cheque provided by you (cheque No., date, amount, payee bank). Do remember the validity of the policy will depend on the validity and clearance of the cheque.

Check IDV, NCB and deductibles: It is important that on receiving the policy you must check the Insured Declared Value (IDV), No Claim Bonus (NCB) and the deductibles (like voluntary excess, compulsory deductible and additional compulsory deductibles); to confirm that the policy received is genuine.

Although, it may appear as minor checks at the time of receiving the policies, this can create chaos at the time of claim. For example, your current policy might have been issued on the basis of wrong declaration of a claims made on the previous policy. This may appear economical at the time of taking the policy, but can prove costlier when your existing insurer discover it at the time of claim. Sometimes, your agent could also lure you in order to give a best economic deal. However, it is your duty to correctly reveal the same while providing details in proposal form. In case the NCB is mentioned wrong, immediately inform it to your insurance company to have a hassle free claim settlement later on.

Sign proposal form on your own: Never allow anyone else to sign the proposal form/cover note on your behalf. Always insist for self signature. This is required as you know what you want and cross-check features of your vehicle. For example, if your vehicle is fitted with CNG that the agent is not aware of and he mentions that the car runs on petrol/diesel, then you would have a problem during a claim. Similarly, you know better whether your vehicle registered under private/commercial than the agent through whom you get this product.

Most private insurance companies have centralized the dispatch of policies, in order to check fraudulent practices. They are also coming up with bar code printing on the face of policy to verify against the proposal form.

Categories: Articles, Car Insurance, Insurance 101, News | Tags: Fake Insurance Policy, IDV, Insurance Premium, Insured Declared Value, NCB, No Claim Bonus

Life Insurance Health Products

Posted on September 3, 2012 by Smita

1 Comment

Health Insurance Products are offered by both Life Insurance Companies and Non-Life Insurance Companies. And there’s notable difference between the offerings of the products from both Life Insurance and Non Life Insurance Companies.

The Life Insurance Health Products can be categorized under 2 categories with respect to the policy term. There is one category which has minimum 3 years policy term while the other category has the policy term of 10 or more than 10 years.

Following is a discussion on the generic as well as supplementary benefits provided by the health products of the Life Insurance Companies.

Generic Benefits

Daily Hospitalization Cash Benefit: This is the benefit provided to the insured in case, the insured is hospitalized (other than ICU) for treatment of any illness or accidental injury, for a continuous period of more than 24hrs. Under such circumstances a daily cash benefit as per the scale of benefits applicable is paid to the insured.
Intensive Care Unit Benefit: This is the benefit provided to the insured in case, the insured is hospitalized to ICU for treatment of any illness or accidental injury, for a continuous period of more than 24hrs. Under such circumstances a daily cash benefit as per the scale of benefits applicable is paid to the insured which is generally double the Daily Hospitalization Cash Benefit.
Maturity Benefit: At maturity, the insured receives a guaranteed lump sum amount as maturity benefit. This benefit is provided only when the policy term is 10 or more than 10years.
Health Saving Benefit: This benefit entitles the insured to claim reimbursement for health care expenses such as medicines and drugs, diagnostic expenses, dental expenses etc.
Critical Illness Benefit: Lump sum benefit is paid, in case the insured contact any of the critical illnesses mentioned in the policy during the coverage.
No Claim Discount: A certain percentage of “No Claim Discount” on the initial premium is granted in each subsequent year when the insured has made no claims during each previous policy year as per the Policy Terms and Conditions.
Renewal Discount: This is the benefit where in, a certain percentage of discounts are given on the premium applicable at the time of renewal of the policy.
Tax benefit: Tax benefits can be availed under Section 80D of the Income Tax Act, 1961.

Supplementary Benefits

Pre and Post Hospitalization Cover: These are the coverage provided for the expenses incurred for a certain number of days prior to the hospitalization as well as after the hospitalization i.e. after the date of discharge. Generally Pre and Post hospitalization provide coverage of 30 to 60 days.
Day Care Treatment Cover: Apart from Hospitalization cover, few life insurance companies provide Day Care Treatment cover, which requires less than 24hours of hospitalization.
Recuperation Benefit: In case of a continuous hospitalization for more than ten days at a stretch, the Policy provides a lump sum amount to the insured as recuperation benefit which is generally equal to three times the Daily Cash Benefit as chosen by the insured subject to a maximum of Rs. 10,000 for the entire policy term.
Family Care Benefit: This benefit can be availed when two or more than two members, covered under the same policy, are hospitalized for the same illness or accidental injury for more than 5 consecutive days then a lump sum amount (independent of the Basic Sum Assured) is payable to meet the incidental expenses. This benefit will be payable to a family only once in a Policy Year.
Medical Check Ups: This is the benefit where in the life insurance companies provide reimbursement for the medical tests subject to a certain limit.
Ambulance Charges: This is the benefit where in the insurance companies pay for the emergency ambulance charges to carry the patient to the nearest medical services.
Total Permanent Disability Benefit: In this benefit, a onetime benefit will be paid in case the insured is totally and permanently disabled due to an accident.
Congenital Benefit: This benefit is provided by few health products. This will cover the listed Medically Necessary Surgical Procedures required in correcting the congenital defects in a child born / adopted by a mother who is continuously covered for a period of time.

Some of the Health Products Offered by Life Insurance Companies

LIC – Jeevan Arogya
SBI Life – Hospital Cash
Metlife – Met Health Care
ICICI – Health Saver
Metlife – Met Health Care
Birla Sunlife – Universal Health Plan

Categories: Articles, Health Insurance, Insurance 101, Life Insurance

Endowment Plan

Posted on August 10, 2012 by Smita

2 Comments

Endowment policy is a type of life insurance policy which provides insurance cover and maturity benefits as well. In case of demise of policyholder, the Sum Assured is paid to the beneficiary. On survival of policyholder, the accumulated amount along with bonuses is paid.
Endowment Policy = Pure Endowment + Term Assurance

Variants of Endowment Policy

Participating Endowment Plan
Non-Participating Endowment Plan

Participating Endowment Policy – Participating policy is also known as with-profit policy. The insurance company shares the excess profit with policyholder known as bonus.

Non-Participating Endowment Plan – Non-participating policy is also known as without profit policy. It does not distribute dividend nor it participate in distribution of profit.

Terms related:

Sum assured: Life of an individual who is taking the policy is insured for a certain amount which is called sum assured. A part of your premium for an endowment policy goes towards covering the life of the insured.

Administrative expenses: A part of the premium is allocated for the administrative expenses of the insurance company.

Investment: Remaining portion of the premium is invested.

Based on the premium paying term Endowment policies can be classified in three categories:-

Regular payment policies: Policies that have regular payment term till the tenure of the policy are called regular payment policies.

Limited premium payment term policies: Policies wherein policyholder had to pay premium for limited tenure while policy continues till maturity are classified as limited premium payment policies.

Single premium policy: Policies wherein policyholder had to pay premium only once while policy remain in force till specified tenure is termed as single premium policies.

Who can opt for it?

Ideally for the younger families that can comfortable afford the higher premiums. This type of policy can be considered as a way to both save and protect the family in case of unfortunate death of the insured.

Benefits:

Maturity Benefits: The insured receives sum assured plus bonus if any at the time of maturity.
Riders: Riders are additional benefit which can be added to basic policy by paying additional premium. Common rider generally offered by insurance company under endowment policy are:-
- Critical Illness: Lump sum benefits payable upon admission of a critical illness claim.
- Waiver of Premium Rider: A clause in an insurance policy that waives the policyholder’s obligation to pay any further premiums if he or she has become seriously ill or disabled. This is a benefit insurance company provides to policy holder if they cannot work.
- Permanent Disability: Permanent total disablement means that life assured is incapable to do any further act or occupation. The following are considered to constitute such disability:
  - irrecoverable loss of entire sight of both of the eyes
  - amputation of both hands
  - amputation of both feet
  - amputation of one hand and one foot
Accidental Death or Dismemberment: In the event of accidental death during the policy period additional amount equal to sum assured is payable to the nominee.
Death Benefits: In case of unfortunate death of the insured the nominee is entitled to receive sum assured plus bonus if any.
Bonus: A bonus is the method for distributing profit to policy holder. For participating policies, bonus is payable along with sum insured at time of maturity or death. For Non-Participating policy unbundled bonus is available where investment, risk and administration components are separate and premium in respect of different components can be clearly identified.
Tax Benefits: Under Section 80C you can avail tax benefit, yearly premium (not more than 1lac) will be deducted from taxable income.

Additional Bonuses

Generally, Endowment plans have two types of bonuses:

Reversionary bonus: Also called regular bonus, this is annual bonus which depends on the performance of the insurer and is added to the fund every year payable at the end of policy period.
Terminal bonus: An additional loyalty bonus offered by the insurer at the end of policy term

Demerit

Endowment plans are priced higher than term plans.

Companies offering such products:

All most all companies offer Endowment Policies.

LIC; Jeevan Anand – This policy is a combination of both Whole Life Plan and Endowment Plan. Under the plan, premiums are limited to the term chosen and benefits are payable on the date of maturity. But the insurance cover on the life assured continues till death, like a whole life policy

Key Features:

Bonus accrues during the premium paying term and is payable at the end of the premium paying term or on earlier death along with Final Additional Bonus. No Bonus is paid on death after the premium paying term.
Double Accident Benefit is available during the premium paying term and thereafter up to age 70 wherein additional sum assured is payable on death due to an accident. This benefit is built in.
Premium payment can be Monthly, Quarterly, Half yearly, Yearly and SSS.

HDFC; Sampoorna Samridhi – is a simple traditional plan which has 2 unique options of Enhanced Cash and Enhanced Life Cover. Thus, if the policyholder opts for Enhanced Cash Option, he would get the usual Maturity Benefits along with additional Bonus and if he opts for Enhanced Life Cover, then he would get life protection till 99 years of age. Hence the second option is a whole life cum endowment plan. However, if the life insured dies within the policy term, then the Sum Assured along Bonus accumulated till then would be paid to the nominee. This plan also has additional Accidental Death Benefit.

Key Features:

It is an Endowment Plan with choice of Maturity Options
Offers High Sum Assured discount for policies with more than Rs 5 Lakhs Sum Assured
Accidental Death Benefit is in built with the policy

Kotak Mahindra Old Mutual Life Insurance Limited; Kotak Endowment Plan – The Kotak Endowment Plan provides you the benefit of systematic savings whilst offering your family the protection of life insurance.

Key Features:

Save and earn more – Not only can Kotak Endowment Plan helps in the objective of long-term savings, it also helps to accumulate bonus earnings on the premiums paid.
Dual benefits of life insurance and investment – One can have the best of both worlds with this savings plan. It provides life insurance coverage to secure family from an unfortunate demise of the life insured. At the same time, it ensures that the insured get their premiums back along with returns upon plan maturity.
Flexible payment period – One can always opt to complete their premium payments over smaller durations such as 3, 5, 7, 10 or 15 years – yet enjoy the full plan benefits for the entire policy term.

Tata AIG Life Insurance Company Limited; Tata AIG Life Assure – This is yet another insurance policy from Tata AIG Life Insurance that has been planned specifically for those people who are looking for higher insurance coverage and that too at a reasonable cost. With the help of this policy the family member of the insured would be able to maintain its present lifestyle even after his or her death.

Key Features:

This is one such policy that offers insurance cover for several years till 60. This means that the coverage could be obtained for 1, 5, 10, 15, 20 and 25 years right up to the age of 60.
In this policy the Term Plan can simply be changed into any of the savings plan of Tata AIG Life.
In this policy the premium that is paid to keep the policy in strength are eligible for tax benefits as per Section 80C of the Indian Income Tax Act. The sum that is received under the Tata AIG Life Assure One year/ Five Years/10 Years/ 15 Years / 20 Years / 25 Years Lifeline Plans is fully exempted from Income Tax as per section 10(10D) of the act.

Aviva Life Insurance Company India Limited; Aviva Money Back - Aviva Money Back Policy is a comprehensive policy that allows the insured to accumulate savings along with valuable life cover protection through:

A percentage of the Life Cover is paid out, depending on the policy term, at the end of pre-defined years
Guaranteed Additions and Simple Reversionary Bonuses
Riders Available: Accidental Death Benefit Rider

Categories: Articles, Insurance 101, Life Insurance | Tags: Endowment Insurance, Non-participating Endowment Plan, Participating Endowment Plan

Monthly Income Plan

Posted on August 2, 2012 by Smita

No Comments

This is one plan which most of the insurance companies are coming up. The first and the foremost thing to understand is the mechanism of the functionality of such investment plans.

MIP is a type of investment vehicle which provides regular monthly payment to the investor. The plan ensures that investor receives a stable amount of fund each month and is therefore typically suitable to the retired persons or senior citizens without other substantial sources of other income. MIP is similar in many ways to an annuity.

How it works:

There are two parts to describe how it works – accumulation part and payment part.

But before that, let’s understand few terms.

Policy Term – It is the number of years the policy will be activated.

Premium – A regular payment made to the insurance company to keep the policy in force.

Sum Assured – The sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured.

Payout Period – The time period during which, the investor receives an expected return from an investment.

Accumulation Part: The insured chooses the policy term as well as the premium payment term. The insured pays premium for the chosen Premium Payment Term. The Premium rates applicable will be dependent on the age, gender, policy term, premium payment mode and chosen Monthly Income.
Payment Part: At the end of the Premium Payment Term, the guaranteed monthly income is received until maturity. Plus based on the offerings of the product, annual reversionary bonus is also paid out if declared.

Following is the illustration of the product Bharti AXA Life Monthly Income Plan.

Who can opt for it?

Ideally for those who are close to their retirement process as there would be an adequate steady flow of income that combines advantages of meeting monthly expenditure as well as capital appreciation..
Depending on the income and needs a person can choose the entry age. Still it is more suitable for the people belonging to the middle age so that during the time they reach the Payout period, the regular monthly income received can help them ensure fulfilling the various education needs of their children as well as the various miscellaneous needs and desires without being felt pressured.

Benefits:

Guaranteed Monthly Income: The insured start receiving the Guaranteed Monthly Income after the completion of the Premium Payment Term, until maturity. This income is tax free.
Loans: There are MIPs which provide the benefit of applying loan against Monthly Income Plan.
Riders: There are products which provide several riders as option.
Premium Discount: This is the benefit where in if the investor chooses high monthly income, rebate on premiums will be provided.
Death Benefits: In case of unfortunate death of the insured the monthly income is received by the family members even before reaching the Premium Payment Term.
Tax Benefits: Under Section 80C you can avail tax benefit, yearly premium (not more than 1lac) will be deducted from taxable income. Under Section 10(10D) death claim is completely tax free.

Companies offering such products:

MetLife providing Met Monthly Income Plan – MetLife offers ‘Met Monthly Income Plan’ a participating plan which guarantees a monthly regular income for insured and family when the insured is there and even if insured is not there for 15 years or till end of the policy term. Moreover the plan lets choose the monthly income that the insured wants and MetLife guarantees that amount.
HDFC – Monthly Income Plan – Long term plan – This scheme has been ranked as number 1 in MIP Aggressive category by Crisil. The primary objective of Scheme is to generate regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme`s assets in equity and equity related instruments.
Max New York Life – Guaranteed Monthly Income Plan – It’s a traditional, non-participating, life insurance plan.

Reliance – Reliance Monthly Income Plan - This is a hybrid fund with a marginal allocation to equity which may go up to maximum 20%. This is ideal for a predominantly fixed income investor with a marginal appetite for equity risk. The investment horizon in this fund should typically be 2 years or more so that the long term benefit of having a marginal exposure to equity pays off. The fund intends to offer a predominantly fixed income investor the power of equity along with the stability of debt. It is suitable for investors with 2 years holding period.

The plan provides several special plans such as:

Systematic Investment Plan (SIP)
Systematic Transfer Plan (STP)
Systematic Withdrawal Plan (SWP)
Dividend Transfer Plan (DTP)
Auto Debit and Electronic Clearing System
Alternative Means of Redemption – Reliance Any Time Money Card
Recurring Investment Plan for Corporate Employees (RICE)
Online Transactions
Salary Advantage

Categories: Articles, Life Insurance | Tags: Death Benefits, Guaranteed Monthly Income, Guaranteed Monthly Income Plan, Met Monthly Income Plan, Monthly Income Plan, Monthly Income Plan - Long term plan, Premium Discount, Reliance Monthly Income Plan, Riders, Tax Benefits

Car Insurance FAQ

Posted on June 16, 2012 by PolicyMantra Team

No Comments

What is car insurance or motor insurance?

Car insurance or motor insurance is a contract between you and your insurance company where you pay agreed amount of premium and your insurance company agrees to pay the financial losses as mentioned in the policy. It’s a protection against financial loss in the event of an accident or in case your car gets stolen.
Motor vehicle insurance comprises of the following coverage:

Property coverage, also known as own damage, pays for theft of or damage to your car.
Third party liability covers for the legal liability to others for bodily injury or property damage.
Personal accident cover, a protection for your own self in case of an accident or mishap.

Third party liability (TPL) and personal accident cover are mandatory under the law Motor Vehicle Act, so you need to need have these two covers if you own car. Property damage (or own damage) cover is optional but it is sensible to have this cover too, in fact if you have financed your car then your financing company compulsorily asks you to buy this insurance. Even if you are buying car on your own it make sense to have a comprehensive policy, comprising all the three cover mentioned above, as in the event of accident or theft it can give you a big hole to your pocket.

Why do I need car insurance?

If you own a car in India you need to have car insurance by law. Car insurance protects you from financial loss and liability. Apart from the fact that it is legally required, it can save you from financial ruin. While driving you are responsible for the safety of:

Your passengers
Your fellow drivers
Other people’s property
Pedestrians
Yourself

Insurance helps cover the costs of potential damages or injuries in case of an unforeseen accident or theft and helps you in obliging any legal liability arises because of your driving.
In its simplest sense, car insurance is smart planning that can help protect you from expensive, sometimes devastating surprises.

Can the policy be renewed online?

Private car insurance policy can be renewed online, provided you renew it between the period starting 2 months before expiry and 6 days after expiry of the previous policy. Please keep in mind that not all the insurer has online buy/renew facility with them.

What is No Claim Bonus?

No Claim Bonus (NCB) is the discount earned in the own damage part of premium due to a claim free year. An insured becomes entitled to NCB only at the renewal of a policy after the expiry of the full duration of 12 months. As per the schedule of tariff, NCB can be earned in the Own Damage section of Policies covering all classes of vehicles but not on Motor Trade Policies (Road Transit Risks / Road Risks / Internal Risks) and policies that cover only Fire and / or Theft Risks.

Is the No Claim Bonus transferable?

Yes, in case you are changing from one insurer to other and have accrued some NCB from the first one, you can always get the benefits for your NCB with the new insurer. You only need to show evidence that you are entitled to No Claim Bonus from your previous motor insurance company. Evidence can be in form of:

A renewal notice, or
A letter confirming the NCB entitlement from the previous insurer.
A written declaration.

Categories: Articles, Car Insurance, Insurance 101

Riders on Health Insurance Policy

Posted on May 21, 2012 by Akanksha

No Comments

If you are willing to expand the benefits of your health insurance policy and for that you are planning to buy another policy. Than think once again as you have another alternative which is easier and cheaper way to maximize benefits of your health insurance policy i.e. riders or add-ons.

What are riders?

Riders or add-ons are attachments that can be attach to your base policy. These riders cover those expenses that are not covered under base policy. These riders provide additional benefits at very nominal cost. These riders can’t be bought stand alone. There are many riders that are available in the market; you can choose them as per your requirements.

How many riders can be added on one policy?

There is no limit on how many riders you can add to your base policy. However, total premiums of all riders should not exceed 30% premium of your base policy.

When you can add riders to your policy

Riders can be added to a base policy at the time of buying a policy or at the time of renewal.

Some important riders

Critical illness rider: Regular health insurance policy does not cover some critical illnesses such as cancer, kidney failure etc. however this can vary from company to company. Than instead of buying a stand alone critical illness policy you can add a critical illness rider to your base policy which is a cheaper option.
Hospital cash allowance: This rider cover all the expenses incurred at hospital during treatment, apart from consultation fees and medicine charges.
Home nursing charges: Most of the health insurance policies do not cover home nursing expenses. This rider takes care of your home nursing expenses.
Ambulance charges: Regular policy does not cover ambulance charges. Therefore, in the situation of emergency this rider can prove very beneficial.
In-patient physiotherapy charges: Sometimes patient is advised physiotherapy during the course of treatment which is not covered under plain vanilla policy. This rider helps in covering those expenses.
Accompanying person charges; Regular policy does not cover the charges for the person accompanying the patient at the hospital, this rider covers all these charges.
Children education fund: There may be situation when a person may not be in position to work for long time, than in such situation this rider help in paying the education expanses of the insured’s children.

Though riders are becoming popular these days but still awareness about the advantages of riders is very low. These riders not only cover some expenses which are incurred during hospitalization but they also cover expenses of post-hospitalization. Most of us are not aware that post-operation expenses can also go very high.

Categories: Articles, Health Insurance, Insurance 101 | Tags: Critical Illness Rider, Health Insurance, Hospital Cash Allowance

A Brief Introduction to Provident Fund

Posted on February 14, 2012 by PolicyMantra Team

No Comments

Employee’s Provident Fund (EPF) is a benefit scheme for salaried individuals for their old age after their retirement. It is not only tax saving instrument but it also provides security and stability to the employee and his family as well.

Under Employee’s Provident Fund and Miscellaneous provisions act 1952 or PF act employees are required to contribute 12% of their salaries towards Provident Fund (PF) with equal contribution by their employers.

In the case of employee not being International Worker (IW) (foreign employees coming to India or Indian going abroad for work) subject to conditions, it is mandatory for employer to contribute towards PF if the number of employees in his firm is 20 or more having salary upto Rs 6,500 monthly. However, employees earning monthly salary more then Rs 6,500 can voluntarily choose to contribute to the scheme.

Salary for the purpose of PF: Salary for the purpose of PF would include basic wages, dearness allowance (including cash value for food concession) and retaining allowance.

Basic wages means all emoluments earned by an employee while on duty/ leave/ holiday, according to the terms of the employment or which are paid or payable in cash. This does not include house-rent allowance, bonus, overtime allowance, commission or any other such allowance.

Contribution of employer for PF: Statutory rate of contribution is 12% (10% for spinning sector and other specific industry) of the salary towards PF and it is tax-free under income tax act. Out of 12% of the employer’s contribution 8.33% is required to be remitted towards pension fund and 0.5% towards Employee’s Deposit Linked Insurance Scheme (EDLIS)’ 1976.

Contribution of employee towards PF: An employee can claim deduction upto Rs 1 lakh per annum under section 80C of Income Tax Act 1961, on his contribution towards PF from his taxable income.

Contribution of employee should be equal to the contribution payable by the employer. However, the employee may at his option contribute an amount more than 12% subject to condition that the employer shall not be under an obligation to contribute over and above his contribution payable under PF act.

Interest on PF: Employees earn interest on both contribution done on his own and contribution made by his employer and interest earned up to 9.5% is exempted from tax.

Transfer of PF: If employee changes his employment then employee is required to change his PF balance under new employer’s account. Such transfer does not entail any tax implication on the employee.

Withdrawal of PF: A member of PF will not be taxed on the withdrawal of PF in conditions such as if he retires after the age of 58 years, if he retires due to permanent and total incapacity for work due to bodily or mental infirmity, termination of service in the case of mass or individual retrenchment, after two months of resignation in the case of no employment.

Taxability in the case of premature withdrawal: If employee had rendered less than five years of continuous service, the employer’s contribution and interest, thereon will be fully taxable as salary income in the hands of the individual. Employee’s contribution will be taxable to the extend of deduction claimed under section 80C, if any, under Income Tax Act 1961 and interest earned on employee’s total contribution would be taxable as income from other sources in the hand of the employee.

Categories: Articles, Insurance 101 | Tags: EDLIS, Employee Provident Fund, Employee’s Deposit Linked Insurance Scheme, EPF, Income Tax Act 1961, PF

Health Insurance Plans