TWENTY THINGS THAT EVERYONE SHOULD BE AWARE ABOUT LIFE INSURANCE. By, Dr. Ashok Chandran

While many of us know about Insurance, the startling fact is that India’s insurance penetration at just 3.76% of the GDP is “extremely low” against comparable Asian countries such as China, Malaysia and Thailand as well as the global average, according to the central government’s Economic Survey of 2020-21

India’s insurance penetration grew from 2.71% in 2001 to 3.76% in 2019 which is much lower than other global economies. India’s life and non-life insurance penetrations in 2019, at 2.82% and 0.94% respectively, are also significantly lower than the global average of 3.35% and 3.88%, respectively.

Insurance protection is all about staying protected for the unknown future. Your family’s protection starts with your awareness about the existence of risk and the nuances of Insurance. Here is a list of terms and things to know for choosing the right Life Insurance cover and for ensuring smooth claim settlement.

1) 100 percent disclosures in proposal, like Smoking, drinking, medical history, Income, family medical history, Covid History etc.

2) Fill and read the proposal form personally to ensure accurate data.

3) Ensure All premium payments on time.

‘Premium’ is the amount to be paid to the Insurance company to keep your policy active.

4) Update Nominee Name and address, especially if Nominee passes away.

5) In case of death, file a claim immediately without any delay.

6) Do medical check-up at the time of buying a new policy.

7) Understand Policy Clauses and Exclusions.

8) Inform your family members about your policy.

9) Keep the Policy Bond/Document safely and accessible to the family.

10) Understand, Claim settlement ratio by policies, while comparing Insurers.

11) Understand Amount settlement ratio: It is important to consider amount settlement ratio in addition to claim settlement ratio by policies, else insurers will clear low value policies and reject high value policies, and this could be misleading.

12) Claim rejection ratio:

The claim rejection ratio or claim repudiation ratio is important as the claim settlement ratio may be misleading when there are high volumes of claims under process and not rejected at the time of such calculation for a particular period.

13) Assets under management: With a larger AUM the company can invest and get better returns. A larger customer base also helps manage risks more accurately. The capacity to settle claims on time also increases.

14) Solvency ratio:

The solvency ratio is a measurement of a company's cash flow and its liabilities. In simple words, it helps you know whether or not the company has adequate funds to manage its short-term and long-term liabilities.

15) Have a Will mentioning the nominee as the beneficiary of your Insurance, especially if he is not an immediate blood relative like father, son or spouse.

16) Go with MWP option wherever appropriate.

Section 6 of the Married Women's Property Act (MWPA), 1874, provides that a policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall ensure and be deemed to be a trust for the benefit of his wife.

MWP protects and ensures that the woman gets all the maturity proceeds independent of the financial liabilities of the Proposer.

17) Define an Insurance objective before choosing an Insurance product, like Income replacement, covering dependant family members, Insuring a family Life goal, Housing Loan liability Protection, retirement planning, corpus/pension creation, tax benefit, Interest protection, leaving behind a legacy, Pure Term/whole life/saving, etc. This helps you choose the product wisely and Insure adequately. A professional Insurance Advisor plays a key role in helping you articulate your objectives and recommending the right product as per the need analysis.

Remember that inadequate Insurance is as good as No Insurance, So Insure with a clear Objective, and not just for having some name sake Insurance.

‘Sum Assured’ is the amount to be paid by the Insurance company to the Nominee?

‘Maturity Benefit’ is the amount to be paid to the insured for surviving the policy term.

‘Policy Term’ is the period for which the policy provides life coverage.

‘Premium Paying Term’ is the period for which premium has to be paid to the insurance company.

Your clear Insurance objective helps defining the Sum Insured, Policy Term and Premium Paying Term, and Maturity Benefit.

18) The earlier you buy an Insurance policy, the cheaper it will be. Younger people get Insurance cover at a very low premium and does not feel the pinch of the premium amount.

19) Probability of getting an Insurance cover: Get Insured whenever you are healthy and eligible. The chances of getting the Insurance is higher, if one does it before age related, infection, weight related, Critical Illnesses, or lifestyle diseases come up. There are many people who are unable to Insure themselves due to various health and weight related reasons.

Save your Medical Records: Discharge Certificate in case of Hospitalisation, X-rays/Scanning Reports, Histopathology Report, Vaccination Certificates Etc. You may need them for the purpose of Insurance.

20) Choose a professional Insurance Advisor, like you choose a doctor for your family. Your Advisor helps you articulate your needs accurately and choose the best suitable product. Finally it is the Advisor who stands by your family, while you are not there, to fulfil the promise of the policy.

Review of your Insurance Portfolio atleast once in a year. Apart from the annual review consult your advisor whenever there is a major life change or significant change in circumstances.

Not Investing sufficiently is a small crime, dying without adequate Insurance cover is unpardonable and a Big lifelong punishment to the family. Insure and Be Secure.

Dr. Ashok Chandran is a full time IRDA Registered Insurance Advisor and can be reached, for Consultations and Insurance Portfolio Review, on Mobile: 9821157708 or E-mail: [email protected]

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