Prajna Capital

BOI AXA Mutual Fund
Things to Keep in Mind when You Buy a Term Insurance
Individual health plan is a safer option

Posted: 19 Jan 2013 05:53 AM PST

The erstwhile Bharti AXA Investment Managers, which was a tie-up between Bharti Enterprises and France's AXA, has a new suitor with Bank of India stepping in to acquire 51 per cent stake in December 2011. Although the AMC in its short history of 4 years did come up with some innovative ideas such as daily SIP and zero balance folios, it was unable to capitalise on the start. A mixed bouquet of fund offerings leaves a lot to be desired.

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Things to Keep in Mind when You Buy a Term Insurance

Posted: 19 Jan 2013 03:49 AM PST

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More and more consumers are looking to buy term insurance thanks to the often repeated advice in the media on keeping insurance and investment needs separate. If you are sure that you should buy term insurance to provide cover to your life against pre-mature death, read on to know how to buy and which product to buy.

Before you decide from where to buy, you should decide how much life cover you should buy. Life insurance is needed in case you are earning with your own effort (which means that the income comes in because of efforts on your part and will stop if you die) and have dependent family members. In case you don't have either of them, then you don't need life insurance. Hence, young unmarried earning members with no dependents, children, homemakers and retired people don't need life insurance. You also don't need life insurance if the only source of income is investment income or rent income, both of which will survive you.

THE COVER YOU SHOULD TAKE:

If you want a rule of the thumb, you should look at a life cover of around 12 times your annual income minus your investment assets plus any liabilities.

IDEAL TENURE OF THE POLICY:

The ideal tenure of your policy would be your retirement age minus your present age. This means that if you are 35 today and you wish to retire at 60, then the term of the policy should be 60-35, which is 25 years.

GO ONLINE AND BUY PRODUCTS:

Term insurance products are being sold online and these products are much cheaper (sometimes by as much as 30%) compared with the products sold through brokers or agents. Selling these products over the Internet does away with the agents' commission, thus bringing down the overall cost of the policy.

THE RIGHT PRODUCT:

When you try to compare the premiums of term insurance plans of various providers in India, then you will see a huge difference in the premiums of these products. Ideally, you should buy the cheapest option available for your life insurance needs. If you have a brand preference you can go for it provided it is not too expensive when compared with the cheapest available policy. The death benefit of all the products is the same and there are no maturity benefits.

DON'T BE DISTRACTED BY RIDERS:

Additional covers for accidental death and disability arising from accidents are available on standalone as well, so don't choose an expensive term plan just because some of them have riders available.

DISCLOSE EVERYTHING: Disclose everything to the best of your knowledge in the form provided to you (online or offline) while buying the term insurance policy, including your existing health conditions, family history and all existing and proposed insurance, including details of any insurance policies refused or provided at higher than normal premium in the past.

TAKE MEDICAL TESTS:

It will always be good for you to go for medical tests as this will reduce any chances of the claim being denied especially since you have disclosed all facts. It is better to pay additional premium for a small health condition (say obesity) rather than the family facing problems with the claim on the grounds that all facts were not disclosed.

REVIEW YOUR NEEDS REGULARLY:

Once you have bought a term insurance policy, you should review it every 3 to 5 years. Over this period your personal circumstances, income, assets and liabilities would have gone through certain changes. So it's always good to review your requirements after 3 to 5 years.

BUY POLICIES IN BLOCKS:

If you need a cover of . 1 crore, take, for instance, two policies of . 50 lakh each, as it imparts flexibility to discontinue one policy while continuing with the other should your insurance needs reduce over time. Of course, this may mean a slight additional premium as insurance companies provide discounts for a single policy with sum assured of around . 1 crore but the flexibility makes the additional cost worth it. Indeed these pointers will help you in getting the right term plan, but ideally you should take help from a financial planner to judge how much life insurance you actually need.

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Individual health plan is a safer option

Posted: 19 Jan 2013 02:16 AM PST

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WHILE choosing a health insurance plan various aspects need to be evaluated. The common queries range from which is the best plan for health insurance, should one go for a floater policy or a plan with individual sum insured, what should be the sum insured and will that sum be sufficient? There are also a few questions that you need to ask yourself such as what is your age, are you single, or do you have a family consisting spouse and children or do you want to cover your parents in the same policy? You need to assess requirements based on all these factors.

For a single person aged 25 years a sum insured of Rs 1,50,000 would be the minimum recommended cover. A person above 25 and up to age 35 years should be looking at any thing around Rs 2,00,000 to Rs 2,50,000. A person above age 45 years must have a policy with minimum Rs 3,00,000 as sum insured. This is considering the incidences of sickness as well average maximum expenses for hospitalisation due to any major illness or accident for respective age groups.

There are floater products in the market where the sum insured floats over the family. This means any one individual under the poli cy can claim up to the family floater sum insured, however, the maximum that can be claimed for all covered persons put together would be limited to the family sum insured in a policy period. Family floater sums insured of Rs 7,50,000 or Rs 10,00,000 could be considered reasonable protection for a family of self, spouse and two children. However, family floater policies with low sums insured say Rs 2,00,000 to Rs 3,00,000 may be inadequate, god forbid there is an accident involving two or more persons of the family and consequent hospitalisation expenses could go very high.

Similarly, if the age profile of persons in the family is on the higher side then considering the risk profiles and incidences of major illnesses, the family floater sum insured may be found to be inadequate.

It is recommended that a policy with individual sums insured would be a better and safe option.

With introduction of portability such policies will be easily portable with full benefits across insurers. The floater policies though cheaper than the individual ones, the benefits from an individual policy in terms of suffi cient protection are much higher compared to the discounts in premiums in a floater policy. Further most policies where sums insured are on individual basis a provision of a family discount of 5 per cent to 10 per cent is generally available when more than one person is covered.

While choosing a retail health insurance plan in addition to the sum insured one has to evaluate the extent of coverage as well as product specifications of the plans offered by different insurers. The waiting periods including those for pre-existing conditions, any sub-limits for room rents, sub-limits for certain specific conditions like appendicitis, hysterectomies, cataracts, detailed exclusion list, co-payments and age up to which the policy is renewal.

One of the biggest differentiator in health insurance are the service levels of the insurer and it has been observed that insurance companies which have an in-house claims servicing unit have proved to be much better in service levels than those who use TPAs.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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