Definition: A financial risk management tool in which the insured transfers a risk of potential financial loss to the insurance company that mitigates it in exchange for monetary compensation known as the premium. Description: Insurance policies, a contract between the policyholder and the insurance company, are of different types depending on the risk they mitigate. Broad categories include life, health, motor, travel, home, rural, commercial and business insurance. The Insurance Regulatory and Development Authority, an agency of the Government of India, is the regulatory body for the insurance sector's supervision and development in India.
Motor Insurance is a contract of indemnity between a owner of the vehicle and an insurance company in which insurer will give a financial protection to the owner of the vehicle against losses due to insured vehicle is stolen or damaged. Two Commonly used motor policy type:
- Comprehensive cover (including third party liability and own damage)
- Third Party Liability only cover
The Insured's Declared Value (IDV) of the vehicle will be deemed to be the "SUM INSURED‟ for the purpose of insurance and it will be fixed at the commencement of each policy period for each insured vehicle. The IDV of the vehicle is to be fixed on the basis of manufacturer's listed selling price of the brand and model as the vehicle proposed for insurance at the commencement of insurance /renewal and adjusted for depreciation.
This concept works on the same lines as the no-claim bonus on your car insurance. A Policyholder, who hasn’t made any claim in a year, can use the bonus to their benefit the following year.
Similarly, CARE offers a 10% increase in the policy sum insured for every claim-free year, with no change in premium. So, a policy with a sum insured of Rs 5 lakh, will get an extended cover of Rs 50,000 the following year at the same premium. A claim-free third year will see him earning another ten per cent extra cover on his base sum insured, taking the total to Rs 6 lakh. A maximum bonus of up to 50 per cent is permissible. In case of claim, the accumulated bonus is reduced by 10%.
Today there is an increased awareness about healthcare costs and mediclaim insurance that helps mitigate the risk of such costs. Most firsttime buyers wonder whether to take an 'individual' insurance policy for each family member or a 'family floater' policy.
Before we look at the pros and cons of each type, let us quickly look at what each of these policies mean. An individual policy means a separate policy for each of the family members. Let's assume that for a family of four members [husband (36), wife (30) and 2 children (6) and (4), respectively] the medical coverage is as under :
3,00,000 for each family member separately (total premium Rs 12,700) Rs 3,00,000 family floater for the family put together (premium Rs 8,800) Let's take an example to understand the impact of each scenario: A. Let's say the wife is hospitalised and the expenses incurred are Rs 2,50,000. The impact is as under:
i. Rs 2,50,000 will be reimbursed under the wife's policy
ii. Rs 2,50,000 will be reimbursed under the family floater policy B. Suppose first the husband is hospitalised (cost Rs 3,00,000) and then the wife is hospitalised (cost Rs 2,00,000).
i.The husband will get Rs 3,00,000 and the wife will get Rs 2,00,000 (total reimbursement Rs 5,00,000)
ii.The husband will use up the entire limit of Rs 3,00,000 and nothing will be reimbursed for the wife (total reimbursement Rs 3,00,000)
Clearly, the first option where each of the family members holds individual cover equal to what you would have taken as a family floater plan works best in all situations but it is also the more expensive option. The family floater plan offers flexibility in terms of utilising the overall insurance coverage among the family as a group.
However, against this supposed saving of Rs 3,900 per year there are several disadvantages of a family floater policy. The policy will be renewed only till the senior-most member reaches the maximum age of renewability allowed by that company. As it stands today, at that stage the other family members will need to take a fresh policy without having the benefit of their claim history and preexisting disease cover that comes from continuous renewal of the policy.
The same thing applies to children who reach the maximum age (normally 21 years to 25 years in most cases) after which they will need to buy a separate policy for themselves without the benefit of the earlier continuous coverage that they have got under the family floater policy.
Most policies (with one exception) also make no specific provision for continuing cover of the surviving members in case of the unfortunate death of the senior-most member.
All in all, since a continuous cover and claim history is critical in this category and the cost of taking individual policies is only marginally higher, it makes no sense at all to buy a family floater policy for a so-called reduction in cost when the family is younger.
Source- The Economic Times
Measures can be taken better by sufferer than anyone else. As an insurers/ brokers you can only suggest the guidelines to your customers.
Before the flood……
- Toll Free No. – Insured to keep the name, address and claims-reporting telephone number of the insurer and broker in a safe and easily accessible place.
- Insured to make physical inventory of the entire items, take photographs or videotape for further documentations. Keep this information and insurance policy in a safe place. Especially of those items carrying the major monetary value.
- Keep all the items in elevated position and cover with the polythene/ plastic.
- Insured to safeguard the records (such as important papers, mortgages, title, bills, accounts, etc,) in a convenient place.
After the flood………
- Insured to report all damages to the insurance company as soon as possible.
- If the roof or windows have been broken, insured to cover them as quickly as possible to avoid from further damages.
- Insured to make a list of damaged items. If possible, put together a set of records, such as receipts, bills and photographs of the items need to replaced or repaired.
- Insured to identify the structural damage to the building and make a list of everything you want to show the surveyor.
- It is good for insured to take photographs of the damage items before start cleaning it up. Insured to avoid throwing damaged items before surveyor’s visit.
- Certain things insured can do to minimize the damage:
- Scrape the mud from the affected items before it dries.
- Avoid to start the electronic or machineries before drying/ cleaning.
- Wood furniture should be dried outdoors.
- A flooded area should be pumped gradually to prevent structural damage.
Recently, the Minister of State for Road Transport and Highways in the Rajya Sabha presented an overview and statistics on road accidents occurred in the country from 2012 to 2014. These accidents were caused by underage drivers and those without valid licences. Such alarming figures of road accidents are not new to India. In a recent journal published by the Insurance Regulatory and Development Authority (IRDA) on “road safety”, it is vividly mentioned that India has 1% of the world’s vehicles but accounts for more than 10% of the people killed globally due to road accidents. The minister pronounced that there was a rise of 54.4% incidences where drivers were not holding a valid driving licence at the time of the accident. West Bengal saw the maximum jump of 1976% in cases, where vehicle drivers didn’t hold valid driving licences. Needless to say, damages to such vehicles will not be reimbursed by any motor insurance company in India as well as across the globe. As per the Motor Vehicle Act 1988, Section 18 and as a mandatory compliance, insurance companies have the authority to reject any motor claim, where it has been established that the driver of the vehicle was underage, drunk or not holding a valid driving licence in conformity to limitations as to use or drivers clause exclusion. The law of the land also underlines severe punishments for such offences, which include imprisonment or fine or both. Even an expired driving licence is considered void and not permissible for claiming insurance, irrespective if the licence has expired a day or a week ago. In a country like India, according to Sections 146 and 149 of the Motor Vehicle Act 1988, a third-party motor insurance cover is mandatory for an owner to ply his vehicle on roads. The mandatory cover is primarily to compensate damages caused to third-party entities i.e. individual or property, by your vehicle. An insurance company can reject third-party claims, although you hold a valid motor insurance cover but do not carry a valid driving licence or are under-aged. Apart from counterfeit and expired driving licence, an insurance company can repudiate your motor claims for numerous reasons. Let us understand the kind of reasons where an insurance company has the authority to reject your motor claims:-
Carrying out repairs without intimating insurer
Many vehicle owners carry the fallacy of having their damaged car repaired after an accident and then approaching an insurance company for reimbursements towards the repair undertaken. Such instances of customer behaviour are seen more after a natural calamity has struck. To avoid the long timeline for repairs at certain garages, customers tend to rectify damages at local workshops and later seek reimbursement for repairs undertaken on their vehicle without surveyor’s inspection. This approach is not advisable. It is imperative for a customer to inform the insurer about damages and ask for an appointed surveyor to inspect the damages. Based on the report of the surveyor, an insurance company would sanction the amount which qualifies under the policy.
Installation of alternate fuel kits
With the rising cost of fuel, customers tend to switch to much cheaper and alternate mode of energy to power their vehicles. Though such decision would lighter their monetary outflows from their pockets, it has some worst repercussions at the time of claim settlement. Insurers do not process the claim of vehicles which have installed CNG/LPG kits and not officially endorsed the kits from the insurance companies. Customers need to keep their insurance company abreast of any change in their vehicle and seek a revised insurance document mentioning the additional installment.
Using private vehicle for commercial purpose
It is blatantly incorrect to use your private (family) vehicle to ferry goods for commercial purpose. Every car in India is registered with the authorities for the purpose the said vehicle will be meant to be used. Any flaws in the usage that leads to the cause of accident will not be covered by the insurance company.
Exceeding seating capacity
One size does not fit all. This is true when you overload your vehicle beyond its specific seating capacity. Accidents that are caused due to excess seating capacity will not be entertained as claim by the insurance company.
The rise in road accidents in India could be attributed to the immature behaviour of drivers who are behind the wheel while under the influence of alcohol and banned drugs that causes death or injury or endangers third-party damage. Insurance companies strictly do not process such claims.
These damages usually reported during the monsoon season and aftermath of a flood. To put simply, a consequential loss is an indirect loss that takes place due to the actions of the insured, where he/she needs to abstain from forcing the vehicle to be driven or started in situations where one action leads to multiple damages to the vehicle. Especially when driving your car in flooded waters or cranking the engine while the car is submerged in water. Sometimes, in a head-on collision, there are chances that an engine oil part is damaged and there is leakage. Forcefully driving your car in such situations leads to the heart of the car— the engine— to fail or seize. The above stated loss is excluded and cannot be covered under the standard motor policy as per the IRDA guidelines. However, insurance companies do have add-on covers that can protect engine failure that can be opted over and above the standard cover.
Miscommunication on add-on covers
Many times vehicle owner may not be aware of the technical meanings of add-on covers available which are relevant to them. This may be the case with own damage especially. Some examples of these cover could be a hire and purchase agreement, pass of the insurable interest, and a hypothecation agreement which insured should know to make a valid claim. Also some exclusion may lead to a claim which the owner or driver thinks as a valid but actually it is not. Damage anything beneath by vibration or load of vehicle. May be the communication in local language help the owner or driver to understand these terms and covers properly and thus make a valid claim under the policy.
Fire incidents in building or commercial complexes have become a part of daily events in India. As per the last public data released by National Crime Record Bureau Data of 2014, a total of 4,058 Fire incidents took place in India during the year 2014.
These included Fire occurring in Residential/Dwelling Buildings, Fire in factories and Fire in commercial buildings. The repercussions from the above incidents lead to 291 individuals being injured and a shocking figure of 4099 human casualties.
Needless to say, the amount of economic losses and destruction of property from such incidents would have been exorbitant. It becomes more distressful and emotionally destructive, when the damages to the physical property are caused to your prized home/bungalow or your shop/commercial office.
The hardship and the daily toil to own your home or run a business, are shattered into ashes within minutes in front of your eyes. The only ex-post facto realization that strikes in your mind, would have been to insure the property from such unforeseen and uncontrollable forces of risk.
By opting for a Home Insurance or a Shopkeepers Insurance cover, an individual stands to minimize the financial losses and empowers him to recoup again and give a fresh start from where it was ended.
So let's comprehend the scope of covers provided under Home Insurance policy to retail customers. Under the basic Standard Fire and Allied Perils policy, insurance companies reimburses the cost of physical damages caused to the property and the contents, due to Fire, Lightning, Storm/Cyclone, Floods & Earthquakes.
It is imperative and pivotal to note that in case of total destruction of the insured premises, insurance company will only consider to reimburse the cost of Reinstatement i.e. the current cost of reconstructing the property and not the cost of land.
Therefore while entering into an agreement with the insurance company, on an independent basis, try to figure out the current cost of reconstruction as available with the local authority, and make sure that, both the parties amicably decide upon the Sum Assured for reconstruction.
On the other hand, some insurance companies do offer an alternative for Reinstatement condition. The individual is offered to consider, opting for Market Value, which effectively means, payments towards Reinstatement cost after deducting the depreciation value of around 2.5% per annum on the age of the building.
If you are of the many individuals residing in a flat in a housing society, you can consider opting for an 'Agreed Value' cover. In such cases, the price of the said property is calculated based on the market value, per square feet of the area as mentioned in the Ready Reckoner for Property Tax and Stamp Duty, issued by the Revenue Department of the State Government for a particular locality in which the Flat/Apartment is situated as on the date of the proposal OR the amount mentioned in the Valuation Report of a Government approved authority as accepted by the insurer along with total square feet area of the flat.
How to calculate the right amount of Sum Insured for your property
Sum Insured = Area of the "Building" (Square Feet) indicated in the Registered Sale Deed Agreement (1000 Sq Ft) X Present Day Cost of Construction in area/ locality where the insured property is situated as per the data available with the local government authority (4000 per Sq Ft) X (1- Depreciation at the Rate of 2.5 % per annum X Age of the Building (9 Years).
Sum Insured = 1000 X 4000 X (1-0.025X9) = 31 Lakh The above example was an indication towards calculating the Sum Insured for protection towards Structural damages (Total Loss) caused due to perils as listed by the insurance companies in their respective policy offerings.
Doubts over insuring the contents of your house can be addressed with a separate policy, offered by insurance companies, which solely extend protection towards the contents of your house.
Content Insurance or Householder Insurance Policy primarily insures the possessions you have inside your house. This typically includes Electronic Equipment's, Gadgets, Personal Technology items e.g. Television Sets, Laptops, Tablets. Such possessions are highly susceptible to perils from Theft and Burglary.
On loss of such possession, the insurance company will provide reimbursement based on the 'Market Value' of the lost product. To derive the market-value, the insurance company will consider the current market cost of buying a similar item of the lost product of the same age.
For items such as Jewellery and expensive valuables such as Watches, the reimbursement is upto 10 percent of the Sum Insured , subject to the policy opted by the insured in consultation with the valuator.
Over and above the mentioned insurance cover, companies in India now have started providing optional Value Added Products, such as, Rent for alternate accommodation in case of total loss to the property and Personal Accident cover for bodily injuries due to the listed perils mentioned in the policy document.
Before opting for a Home Insurance, it is strictly recommendable to understand the Exclusions and the process of claim intimation. Certain ownership of communicating with the insurance company in case of unoccupied property for a certain period of time is the responsibility of the insured customer to avoid claim repudiation.
Source- Business Today
Personal accident insurance covers death or disablement to the insured person, arising out of accident. Personal Accident policy may be renewed by mutual consent every year and in such event, the renewal premium shall be paid to the company on or before the date of expiry of the policy or the subsequent renewal thereof. The company may at any time, by notice in writing, terminate the policy and company shall return to the insured a pro-rata part of the premium. In personal accident insurance, the main factor used to arrive at the premium is the occupation.
Basic principles that guide personal accident insurance include
- Utmost good faith,
- Insurable interest and
- Subrogation etc.
What are covered under Personal Accident Policy?
- Permanent total disablement,
- Permanent partial disablement and
- Temporary total disablement is covered under P.A. policy.
The exclusions commonly found in personal accident policies include payment of compensation in respect of death, injury or disablement of the insured, from intentional self-injury , suicide or attempted suicide or from service in the armed forces etc. Medical expenses, war and allied risk extensions can be availed under a P.A. policy for an additional premium.