Frequently Asked Questions

Health Insurance (5 Questions)

What is Health Insurance?

The term health insurance is a type of insurance that covers your medical expenses. A health insurance policy is a contract between an insurer and an individual /group in which the insurer agrees to provide specified health insurance cover at a particular “premium”.

What are the forms of Health Insurance available?

The commonest form of health insurance policies in India cover the expenses incurred on Hospitalization, though a variety of products are now available which offer a range of health covers, depending on the need and choice of the insured. The health insurer usually provides either direct payment to hospital (cashless facility) or reimburses the expenses associated with illnesses and injuries or disburses a fixed benefit on occurrence of an illness. The type and amount of health care costs that will be covered by the health plan are specified in advance.

Why is Health Insurance important?

All of us should buy health insurance and for all members of our family, according to our needs. Buying health insurance protects us from the sudden, unexpected costs of hospitalization (or other covered health events, like critical illnesses) which would otherwise make a major dent into household savings or even lead to indebtedness.Each of us is exposed to various health hazards and a medical emergency can strike anyone of us without any prior warning. Healthcare is increasingly expensive, with technological advances, new procedures and more effective medicines that have also driven up the costs of healthcare. While these high treatment expenses may be beyond the reach of many, taking the security of health insurance is much more affordable.

What kinds of Health Insurance plans are available?

Health insurance policies are available from a sum insured of Rs 5000 in micro-insurance policies to even a sum insured of Rs 50 lakhs or more in certain critical illness plans. Most insurers offer policies between 1 lakh to 5 lakh sum insured. As the room rents and other expenses payable by insurers are increasingly being linked to the sum insured opted for, it is advisable to take adequate cover from an early age, particularly because it may not be easy to increase the sum insured after a claim occurs. Also, while most non-life insurance companies offer health insurance policies for a duration of one year, there are policies that are issued for two, three, four and five years duration also. Life insurance companies have plans which could extend even longer in the duration. A Hospitalization policy covers, fully or partly, the actual cost of the treatment for hospital admissions during the policy period. This is a wider form of coverage applicable for various hospitalization expenses, including expenses before and after hospitalization for some specified period. Such policies may be available on individual sum insured basis, or on a family floater basis where the sum insured is shared across the family members. Another type of product, the Hospital Daily Cash Benefit policy, provides a fixed daily sum insured for each day of hospitalization. There may also be coverage for a higher daily benefit in case of ICU admissions or for specified illnesses or injuries. A Critical Illness benefit policy provides a fixed lumpsum amount to the insured in case of diagnosis of a specified illness or on undergoing a specified procedure. This amount is helpful in mitigating various direct and indirect financial consequences of a critical illness. Usually, once this lump sum is paid, the plan ceases to remain in force. There are also other types of products, which offer lumpsum payment on undergoing a specified surgery (Surgical Cash Benefit), and others catering to the needs of specified target audience like senior citizens.

What is cashless facility?

Insurance companies have tie-up arrangements with several hospitals all over the country as part of their network. Under a health insurance policy offering cashless facility, a policyholder can take treatment in any of the network hospitals without having to pay the hospital bills as the payment is made to the hospital directly by the Third Party Administrator, on behalf of the insurance company. However, expenses beyond the limits or sub-limits allowed by the insurance policy or expenses not covered under the policy have to be settled by you directly with the hospital. Cashless facility, however, is not available if you take treatment in a hospital that is not in the network.

Conventional Life Insurance (3 Questions)

What should I look for before I decide to buy a policy?

You must check and see whether or not there is availability of guarantee of return, what the lock in period is, details of premium to be paid, what would be implications of premium default, what the revival conditions are what the policy terms are, what are the charges that would be deducted, would loan be available etc.

What is the importance of a proposal and the disclosures made therein?

The disclosures made in a proposal are the basis for underwriting a policy and therefore any wrong statements or disclosures can lead to denial of a claim.

What are special medical reports required to be submitted in Life insurance?

In case of certain proposals, depending upon the age of entry, age at maturity, sum assured, family history and personal history, special medical reports may be necessary for consideration of a risk. E.g. if the proposer is overweight, special reports like Electro Cardiogram, Glucose Tolerance test etc could be required, while for underweight proposers, X-ray of the chest and lungs with reports could be required.

Motor Insurance (3 Questions)

What Motor Insurance cover should I buy? Should I buy Comprehensive Insurance or Liability Policy only?

Third Party Liability insurance is mandatory for all vehicles plying on public roads in India. This covers Liability for injuries and damages to others that you are responsible for. In addition, it is prudent to cover loss or damages to the vehicle itself by way of Comprehensive/Package policy, which covers both “Liability” as well as “Own damage” to the insured vehicle. Liability Only cover is also known as Act Only cover.

How is the premium determined?

Many factors determine the premium you will pay. For Own Damage cover different insurance companies charge different premiums for similar coverage. Shop around; getting three or more comparison quotes is worthwhile. Check various insurers’s websites; it will help you compare premiums. Do not forget to compare deductibles, coverage and IDV’s as premium may be lesser of one insurer but with higher deductibles, lower coverage and lower IDV, which will adversely impact you in the event of claim settlement.

What coverage limits meet my needs?

The sum insured for the vehicle is called “Insured’s Declared Value” and should reflect the current market value of the vehicle. Under Liability insurance, Third Party Liability insurance is covered. There is unlimited coverage to Third parties injury and Third party property damage is covered up to a sum of Rs 7,50,000. The Insured has the option to restrict coverage for Third Party Property damage to Rs 6,000 and this will result in a lower ”Liability Only” premium.

Property Insurance (5 Questions)

What are the requirements to purchase a property insurance policy?

The proposer of the policy should first and foremost have an interest in the assets being proposed for insurance, i.e. he/she should stand to lose financially in the event of loss or damage to such assets. Secondly, the proposer should submit a proposal form (which can be obtained at any insurer’s website or office). The proposal form should disclose all details, which are true to the insured’s best knowledge and other information, which the proposer may feel is relevant.

What are the different types of Property Insurance Policies?

The most popular is the Standard Fire & Allied Perils policy which covers most of the perils the property is exposed to like fire, riots, flood, and storm. Loss of current assests due to burglary and theft can be covered under a Burglary & House Breaking Insurance Policy. Valuables can be covered under All Risks Policies and there are package policies for house owners and shopkeepers.

How does one fix the sum insured?

Generally, there are two methods. One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case of M.V, in the event of a loss, depreciation is levied on the asset depending on its age. Under this method, the insured is not paid amount sufficient to buy the replacement. In the RIV method, the Insurance Co. will pay the cost of replacement subject to ceiling of S.I. Under this method, no depreciation is levied. One condition is that the damaged asset should be repaired / replaced in order to get the claim. It may be noted that RIV method is allowed only for FIXED ASSETS and not for other assets like stocks and stocks in process.

What will be the cost of a fire insurance policy?

The cost of a fire insurance policy or the Premium can depend on the • Perils to be covered • The value of the items covered • The usage of the premises proposed for insurance • The location details of the premises proposed for insurance etc. • The construction of building and occupancy Consequent to de-tariffing of the non-life insurance segment (except Motor Third Party Insurance where premium rates laid down by IRDA), premium rates charged by each insurer may differ. However, they should have been filed with the IRDA under File & Use procedure.

In case of loss, what are the obligations of the insured?

Every insured is expected to behave as though he is uninsured. Take all precautions to prevent / aggravate the loss. Inform Insurance Company who have to be given an opportunity to inspect the damages. Inform fire brigade who will assist to put out the fire. During fire fighting, any damage caused to other insured property caused by water, will be paid by Insurance Company. Extend cooperation to surveyor while inspecting and assessing the loss. If arrival of surveyor is likely to be delayed, then, take photos / and shift unaffected assets to a place of safety. Give completed claim form and documents as required by Insurer, in support of your claim. After repairs / replacement, submit bills to Insurer.

General Questions (9 Questions)

What is Utmost Good Faith?

Utmost Good Faith is one of the principles that insurance is based on. It denotes a positive duty of the person seeking insurance to voluntarily disclose accurately and fully, all facts material to the risk being proposed whether requested or not.

What is meant by Insurable Interest?

The financial interest that the assured possesses in whatever is being insured is known as “Insurable interest”. In other words, it is the right of a person to insure something which, when lost or damaged, would mean a financial loss to him. If a person is allowed to insure something that he does not own it becomes a wagering contract and therefore void under Section 30 of Indian Contract Act. Therefore Insurable interest is a pre-requisite for insurance and the compensation is limited by the value of the subject matter of insurance and the extent of insurance coverage. In Life Insurance, though human life value cannot be measured in monetary terms, insurers determine the sum assured as a multiple of the income of the life assured and his remaining productive years.

What is the difference between an Insurance Agent and an Insurance Broker?

An insurance agent can represent only one insurer and do business for him. An insurance Broker is basically the representative of the customer and can sell the policies of more than one insurer. In the Indian context an Agent can represent one Life insurer, one Non-Life insurer and one Health insurer. In addition he can represent one credit insurance company and agricultural insurance company too. Detailed regulations have been framed by Insurance Regulatory and Development Authority (IRDA) for both Agents and Brokers and they govern them.

What is an ‘insured peril’?

The purpose of insurance is to compensate you for a loss caused by an insured perils. If your stocks are destroyed in a fire, the cause of loss is fire which is payable under a fire policy. If the stocks are stolen, the loss is not payable under a fire policy as “Burglary” is not a covered peril.

Can an insured claim any amount from his insurer regardless of the extent of loss?

No. The loss will be surveyed and amount payable assessed and this is subject to calculations like depreciation and policy excess so that the compensation is strictly for the loss suffered and to the extent suffered. The concept is that an insurance policy should not be the means to making a profit. However it is possible to take some policies on a ‘Reinstatement Value Basis’ so that, in the event of a loss, the claim will be paid on the basis of creating a new asset in the place of the old one rather than on the depreciated or market value of the old asset.

What is the meaning of Deductibles?

In some policies there is a clause that a specified amount will be deducted from the claim amount. For example in Industrial Risks 0.5 per cent of the total sum insured subject to a minimum of Rs.1 lakh is the deductible if loss is due to Terrorist Act. This means that the first Rs one lakh of any claim and up to 0.5 per cent of the claim has to be borne by the insured. If the loss is below Rs one lakh then no claim is payable. This is a way for the insurance companies to avoid the administrative costs of small claims and the insured is usually given a premium rebate for accepting this burden.

What is the meaning of Co-Insurance?

Corporate clients, who want to oblige more than one insurer, or benefit from the competitive forces among insurers, place their insurance business with more than one insurance company. While doing so, they select one company as the “Leader” who is given higher share of premium and others are given lesser share. Client deals only with the “Leader”. The leader will share the premium (in the ratio decided by the client) as well as claims with other participating insurers who are called Co-insurers. Depending on the total volume of premium, it can be placed with 2, 3, 4 or more insurers.

What are the Rules of the Insurance Ombudsman Scheme?

The objective of the Insurance Ombudsman Rules is to resolve all complaints relating to 1. Partial or total repudiation of claims 2. Any dispute regarding premium paid or payable in terms of the policy 3. Any dispute about the legal construction of the policy relating to claims 4. Delay in settlement of claims 5. Non-issue of any insurance document to customers after receipt of premium, in a cost effective, efficient and impartial manner. These rules are called Public Grievances Rules – 1998 and were notified by Government of India and published in the Gazette of India on 11.11.1998.

What is a TPA and what are its functions?

A TPA is a Third Party Administrator. They are commercial entities duly licensed by IRDA. Their services are utilised by Insurance Companies, both Life and Non-Life, to render, on their behalf, post-sales services to health insurance policyholders. They provide services like: • Guiding the insured with regard to claims • Issuing photo ID cards to insured persons • Issuing pre-authorisation to hospitals to facilitate insured persons to avail of the cashless facility and Process and settle claims for reimbursement

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