5 mistakes to avoid while buying online insurance

Online plans offer convenience, but since you are your own agent, find out how to be responsible too. Of late, online insurance plans have gained popularity, spurring investors to use the medium for various reasons—low premium, convenience, absence of agents. Despite this, there is widespread scepticism about purchasing policies online. If you too have doubts, consider the following points and ensure that your online ride is smooth and not rendered bumpy by ignorance. 1 Submitting incorrect information in form  Just because there's no agent to oversee the filling up of the form, do not submit incorrect information. The insurance company can reject a claim if it discovers that certain key facts are wrong or have been deliberately hidden by the policyholder. The main objective of the policy would go up in thin air if a claim is rejected. If a close relative has suffered from any of the specified ailments (diabetes, heart problem, hypertension), say so in the form. If you are a heavy smoker, don't categorise yourself as a casual smoker. This would be tantamount to suppression of a key fact. Keep in mind that the nicotine levels can show up in your blood tests. "Also, medical tests vary widely from company to company. Some may be lenient, while others could be very strict. It is important that you disclose the facts because later your dependants will have a tough time handling the claim. As it is an online policy, they won't have any agent to argue their case," says Jayant Pai, vicepresident, Parag Parikh Financial Advisory Services. How you can avoid it: Obtain all information about your family's medical history before you fill up the form. Disclose all facts about your social habits and lifestyle. 2 Not comparing all the available options  Unlike other, more complex and sophisticated insurance products, a term plan is a commodity. By and large, its features do not vary across insurers and it all boils down to the lowest premium. However, zeroing in on the cheapest plan is possible only if you have done adequate window shopping and compared the premiums of all the 8-9 companies that offer online term plans. Some buyers believe that a certain company with a higher claims ratio is a better option, but this may not be true. "Comparing term plans is not difficult as most policies have the same features, but it becomes difficult with health policies, as you need to dig out more information, such as hospital network and exclusion clauses," says Deepak Yohannan, CEO, MyInsuranceClub.com. How you can avoid it:Evaluate and compare plans before you buy. Use an aggregator site to go through the premiums of other plans. 3 Buying too big a cover for too long a term  Ironically, the biggest advantage of online policies may also prove to be a drawback. The low premium may entice you into taking a cover that is bigger than what you need. "Do not buy a big cover just because the premium is low. Do so only if you need it," says Gopal Kumar, principal consultant, Allons Insurance Research. You may need a 1 crore cover that costs 12,500 a year, but since a 2 crore cover can be bought for an additional payment of 5,000, you jump at the offer. "It may seem like a good deal, but if you do not require that much insurance, you are actually wasting 5,000," explains Pai.      The other problem is that you may take a cover for a tenure that extends well after you stop earning. Some companies offer covers till the age of 75. However, there is no compulsion to pick one that lasts longer than your earning years. How to avoid it: Though low premium may seem attractive, it should not be the guiding factor while buying a policy. Once you decide that you need a certain level of cover, look for the options that are available online as well as offline. Depending on your affordability, choose plans that offer suitable premiums. "Assess your need and assetliability situation while buying insurance," says Kumar. 4 Opting for too short a tenure or low insurance cover  The flip side of the above mistake is taking too small a cover or doing so for too short a term. A life cover of 50 lakh might seem enough right now, but even 6% nominal inflation will reduce its value to about 28 lakh in 10 years. Buy a cover that is big enough to take inflation into account. The bigger mistake is buying a cover for a short tenure. A policy that ends when you are in your 40s is a big waste of money. You are effectively insuring yourself during the low-risk years, but when the risks and liabilities are at a peak, you are without cover. Buying a fresh cover at that age will cost a bomb. What's more, you could be denied insurance if you have developed a medical condition. How to avoid it: Buy a cover that continues till the time you are 60-65 years old. Also, make sure that you calculate your insurance needs carefully before deciding on the insurance amount. Take into account inflation as well as your other expenses and outstanding loans. Sanjay Tiwari, vice-president, strategy & product, HDFC Life, suggests the use of insurance calculators. These are easily available on the websites of companies and tell you how much insurance you need depending on your income and other factors, such as age. 5  remind you about paying the premium in subsequent years, the onus of paying on time lies on you. If you miss the due date as well as the grace period for making the payment, the policy will lapse and  Not setting up reminders for premiums  With no agent to  you will have to buy it afresh. Yes, there is a 15-30-day grace period for paying the premium, but this is only for renewing the policy, not for continuing the cover. In other words, if the premium is not paid and something happens to the policyholder, the company will reject the claim saying that the policy has lapsed. How to avoid it: The best way to avoid missing the due date to pay premium is to give an ECS mandate to your bank for doing so. In this manner, you can ensure that your precious life insurance cover does not blow away just because you didn't pay the premium. Even if you forget, your bank won't. This also means that you will have to ensure there is enough money in your bank account when the ECS payment is due. You can also set reminders for the premium payment.      Online policies are meant for buyers who understand the need for insurance and know which product they want to buy. One should opt for an online policy only if one is willing to take the trouble of doing the agent's job himself. From submitting the form to paying the premium and rectifying errors, it is your responsibility and you should know how to fulfil it.

INSURANCE Review KOTAK ASSURED INCOME PLAN Assured Income for Life, Limited Cover for Death

Product Details 
Kotak Assured Income is a 30-year savings cum protection plan, with a premium paying term of 15 years. As the name suggests, this plan guarantees payment of an annual income to the policyholder starting from the end of the 10th year until maturity, ie, for a period of 20 years. Apart from this guaranteed annual income, the plan will also pay a lumpsum amount on maturity that will be 104-110% of the basic sum assured 
Key Features 
The annual tax-free income guaranteed by this plan ranges from about 9.1% to 10.10% per annum of the sum assured, depending upon the amount of annual premium paid by the policyholder. The sum assured (insurance cover) under this plan is 10 times the annual premium. Investors should, however, note that the assured income is payable annually only to the policyholder and not to the nominee. 
Returns ANALYSIS 
Kotak Assured Income gives the policyholder the dual benefits of guaranteed annual returns and a lumpsum payment on maturity. This maturity benefit is determined by the age at entry as (110% - 0.1% × Age at Entry) × Sum Assured. Thus for an individual aged 30 years, the maturity benefit will be 107% × Sum Assured. Assuming 30 years as entry age, the returns that will accrue to an individual under this scheme are illustrated below. 
    Our View 
The guaranteed annual income payable under the Kotak Assured Income Plan is definitely impressive and so is the maturity benefit, which is a percentage higher than the basic sum assured. In fact, after the 10th policy year, the annual assured income broadly compensates for the premium outgo. If one were to assess the total cumulative returns under this plan, they range from 91% to 108% (absolute gains over 30 years) depending upon the entry age and premium payable by the policyholder. A downside to the scheme, however, is that the annual assured income accrues only to the policyholder and not to the nominee. The nominee is entitled only to the basic sum assured, which is 10 times the annual premium, in the event of policyholder's death before maturity. Kotak Assured Income is thus an impressive savings plan, suitable for those who do not have major medical complications. Those seeking healthy insurance cover should rather opt for a term plan. W i t h t h i s p l a n, h o w e v e r,i t p a y s t o l i v e l o n g e r !

BETTER DEAL Portability drives health cover innovation

Mumbai: Health insurance market has become competitive following the introduction of portability which allows customers to switch companies without losing their "no-claim" benefits. Although prices have not come down, companies are offering better features.      The latest is a health policy by Apollo Munich where the sum insured is reinstated in full after a claim. Under the health plan "Optima Restore", if the policyholder uses up the sum insured for any ailment, the sum insured will continue to be available for any new ailment.      Earlier in October, L&T General Insurance had launched a new plan that reinstated the sum insured if the policyholder had an accident. Apollo Munich has extended the reinstatement for all ailments and is also offering the feature on a family floater plan. Family floater plans are covers where the same sum insured is available for all members. Under "Optima Restore" even if a family member uses up the sum insured the cover is once again reinstated after the claim. Also for those who do not claim, the sum insured will double in two years under a multiplier scheme. Other insurers such as Bajaj Allianz General Insurance are using direct marketing to sell policies through the internet.      Until now, it was largely property covers like fire insurance that had a reinstatement clause. This allowed for the sum insured to be restored and the cover to continue for the rest of the year for any subsequent claim. According to Antony Jacob, CEO, Apollo Munich Health, despite the additional benefits the price has been kept competitive compared to plans of companies that do not the reinstatement option. He said the company every month sees around 1,000 policyholders from other companies choosing to shift to Apollo Munich.      Besides the introduction of portability, innovation in health insurance is being driven by monoline companies like Apollo Munich that specialize only inhealth insurance. Other specialist companies include Star Health and Allied Insurance and Max Bupa Health. More recently, Cigna has entered into a tie-up with TTK Group to provide health insurance in India.

IRDA wants lifelong renewal for health covers

Mumbai: The insurance regulator has told insurance companies that when they design new health plans there should not be a maximum age for existing policyholders. Companies will continue to have the freedom to set an age limit for entry — that is for buying the policy for the first time. But once they have issued apolicy, they will be obliged to continue renewing it during the life time of the policyholder.      Most health plans in the past have had a maximum age limit. The plans that were introduced earlier with a maximum age limit will continue to be sold as the pricing was based on the earlier design.      "Our health policies were life long renewable even without the regulator insisting on this feature," said Antony Jacob, CEO, Apollo Munich Health Insurance. Insurance officials said that lifelong renewal would require a re-look at pricing because their claims experience at the higher age bracket of 85 and above was more than 100%.      Secondly, health insurance penetration has picked up only in recent years and insurance companies do not have enough experience of morbidity at higher age groups. According to Jacob, unlike life insurance it is not possible to have flat premium rate over the years because the cost of treatment keeps rising because of medical inflation. TNN