INSURANCE KOLKATA

CONTENT COURTESY : THE ECONOMIC TIMES 26 MAR 2013

Insurance sales people are trying to push unit linked insurance plans (Ulips) to unsuspecting individuals who are in a rush to invest in tax-savings instruments as another financial year nears the end.

According to investment experts, even financially savvy individuals, in a hurry to meet the March 31 deadline, don’t make an effort to understand all the charges that apply to this new breed of Ulips.

“Though commissions have dropped from over 20-30% before September 2010 to 8-10% now, Ulips are still an expensive affair. Many insuranceseekers do not realise this,” says Pankaj Mathpal, CEO of Optima Money Managers.

Insurance Regulatory and Development Authority (IRDA) had capped charges on Ulips in September 2010 following widespread criticism about mis-selling of these products.

“Also, most people tend to focus on premium allocation alone. But, there are several other charges, like policy administration and mortality charges, which affect your total corpus,” says Mathpal. For instance, policy administration charges in some Ulips increase every year after the fifth year.

If you have decided to buy Ulips — which experts don’t think is the ideal way to save tax or buy insurance cover — try to identify the least expensive one, say investment experts. Simply jot down the premium and charges you would pay in, say, 10 years.

Consider buying a Ulip which allocated the maximum portion of your premium towards investment. Another point to note is that you shouldn’t get swayed by assurances or claims by your financial advisor about returns, as these products are market-linked.

Premium allocation charge

Independent financial planners used to frown upon Ulips because of their higher premium allocation charges. Before Irda clamped down on charges more than two years ago, insurance companies used to deduct over 20% of the first year’s premium as allocation charges.

Following Irda’s new regulations, the figure has come down to 7.5% in most Ulips. Commissions, too, have come down to 8-10%. However, financial planners continue to consider Ulips as relatively expensive products. So, study the product brochure and benefit illustration closely to understand the charge structure.

Policy administration charge

When you analyse the benefit illustration, you will realise that in addition to premium allocation charges, a seemingly small, ad-hoc sum is deducted from your premiums every month. Known as policy administration charge, it used to form a minor component of the Ulip charge structure before the new guidelines came into effect.

Typically, the charges are in the region of Rs 70-100 per month during the initial three to five years. In case of many Ulips, the policy administration charge goes up by, say, 3-6% every year after the initial period.

CONTENT COURTESY : THE ECONOMIC TIMES, 15 May 2013

Private life insurer HDFC Life announced the launch its indemnity-based plan Health Assure on Wednesday. Insurance-seekers can choose from two variants – goldand silver plans. In case of the former, sum insured under individual and family floater options can go up to Rs 5 lakh and Rs 10 lakh respectively. Under the silver plan, an individual can only buy a cover of Rs 3 lakh. For floater cover, the maximum limit is Rs 5 lakh. Under family floater, you are allowed to cover spouse, children, parents as well as parents- in- law. Maternity expenses are covered under the gold plan of family floater policies, provided the policy has been in force for at least three consecutive years. However, the overall sum insured is subject to sub-limits – 1% per day for room rent and 2% per day in case of intensive care unit hospitalisation.

Like some of the new-age products launched in the recent years, this product, too, counts a high no-claim bonus rate among its key features. Health Assure promises a no-claim bonus of up to 50% in case of one claim-free year. The annual limit gets doubled after two consecutive claim-free years, but the total cover cannot exceed 200% of the original sum insured at any stage. The plan comes with a three-year tenure, which means that your premiums remain stable during this period even if you make a claim. You will have to renew the policy after completion of three years.

Upside : No-claim bonus of up to 50% for a single claim free year is a plus, as your sum insured is enhanced without hiking your premium. This could help in offsetting medical inflation which reduces the value of your sum insured every year.

Downside : Unlike some of the newer products launched in the market in the recent months, this product does not offer a zone-based premium structure. For instance, a 30-year-old woman buying a Rs 5 lakh cover under the gold plan will have to pay an annual premium of around Rs 9,000, irrespective of whether she lives in Mumbai or say Coimbatore, where healthcare costs are relatively lower.