Student insurance plans: A safe lesson
It was around midnight but the Verma family was awake. The rising tension and anticipation in the room was not because they were watching a movie but were waiting for the phone to ring. While, Mrs Verma almost appeared to be on the verge of tears, her husband stared in blank dismay. Six months ago, their only son, Anuj, had left for
The previous evening, news reached them that Anuj had met with an accident. Since then, the family had not slept. After a painful hour of waiting the phone rang. Anuj reassured his mother that it’s now all well and then had a long chat with his father. Later at night, when Mrs Verma finally slept, her husband took out a calculator and pondered over what Anuj had said.
Anuj had told his father about the medical expenses and how he had to pay them before being discharged. It was not until late afternoon, the next day when Mr Verma realised that in a hurry to leave the India, Anuj had completely missed on signing up for a student insurance policy. “This happens quite often,” says Ashish Kapur, CEO, Invest Shoppe
Increasingly, with low interest rates on student loans, foreign education is no longer the privilege of just rich people. Last year, the
Considering the increasing student out-bound traffic, several Indian insurance companies have come up with different student insurance plans. The insurance policies primarily cover students against any kind of accidents besides other benefits. But signing up for the policy is not enough, choosing the correct plan requires some assessment.
Today, there are policies such as student safety insurance, overseas mediclaim for students and even tailor-made cover for educational institutions offering package cover for students. “While opting for an insurance plan, students should check whether the insurance is valid in that particular university or not. Generally insurance from companies who have worldwide presence are valid at all universities,” says Shreeraj Deshpande, head, health and travel Insurance, Bajaj Allianz General Insurance.
Students when travelling overseas generally look for coverage of health, loss of passport and any other liability cover. They can also ask for cover for loss of books and clothing. “Besides checking the insurance company’s tie-up with hospitals near the student’s location and the reach of third party service providers, one should also keep in mind the different add-on covers that are available, such as coverage of attendant’s visit to the student in case of any medical emergency,“ says an official from New India.
A student insurance policy should cover the entire period of the study term and the coverage should be according to the risks they would undergo while at a foreign location. Students, however, have the option to choose the period and should opt for a plan according to their period of stay.
Some universities, however, insist that the students should opt for proper medical coverage through local agencies. Many universities also add insurance in their tuition fee, which includes drug addiction protection and pregnancy protection. “Taking insurance cover from an Indian company for a medical liability cover of $250k will be at a per month premium of $30. Similar insurance cover of $250k is typically available at higher premium of $45-60 abroad. Further there are other travel related benefits bundled into Indian policies such as passport loss and baggage loss,” reasons Sudipto Ghosh, manager, advisory services, KPMG.
To settle a claim is not difficult provided you have the right documents. Most of the insurance companies have tie-ups with international agencies/service providers who are involved in processing the claims. The insurance company pays a premium to these agencies for rendering these services.
When the policy is issued, the contact details of these agencies are mentioned which helps the students in case there is a need to raise a claim. “Not being aware of the policy terms and conditions, coverage, exclusions and ignorance about the details of the service provider often leads to students facing undue hassles,” says the official from New India.
All the necessary claim forms detailing the procedures are being given along with policy documents. Typically the necessary documents required are — Duly completed and signed claim form, policy copy and air ticket jacket / boarding pass.
At home, Mr Verma was pondering over discontinuing his fixed deposit account. This situation could have been avoided, if only Anuj was a bit more alert. After all insurance, at home or abroad, is not only a matter of choice but necessity as well.
Got a life insurance policy you want to get rid of? Want to earn a little more than what the insurance company would pay you as surrender value? Go, trade in your insurance policy. Thanks to a recent Mumbai high court verdict, you can now trade in your life insurance policy. Especially, on policies you don’t want to continue paying the premium.
In fact, many people were already trading in their policies before the Life Insurance Corporation of India banned the process. Apart from Insure Policy Plus Services (India), a company that specialised in trading in lapsed insurance policies, few individuals were also purchasing lapsed insurance policies to trade in them, said an industry source.
Insure policy Plus Services is said to have bought crores of rupees worth polices and it was the one who approached the court against LIC circulars. However , attempts to contact the I company failed. How does it work? The company or individuals who want to purchase life insurance policies contact insurance agents for details of individuals who have bought insurance products with guaranteed returns, but failed to pay the premium on time.
The next step is to approach this individuals with a slightly better amount than the “surrender value” the insurance companies pay on lapsed policies. ‘‘Many times, the surrender value may be less than the total premiums paid. In such cases the policyholder would be too happy to sell the policy ,’’ said an insurance agent with LIC.
Now, the policyholder would have to assign the policy (the same process in which you transfer the rights to bank or housing finance company to avail loans) to the purchaser . The company or individual who bought the policy will renew the policy and pay the premium for the remaining term. On maturity of the policy, the new owner would get the insured amount plus bonus, all tax free.
An insurance agent offers a practical example : Jeevan Shree, a favourite insurance plan of traders from LIC meant for high networth individuals, used to offer around 9% returns (guaranteed addition plus loyalty addition , in insurance parlance).
Traders would approach individuals who haven’t paid premium for one or two years and offer them better deal than the surrender money offered by LIC. They would revive the policy and pay the remaining premium and pocket around 14-15 % returns (higher returns is because of the short time they have to wait for the money) on maturity of the policy or on death of the policyholder.
‘‘It was win-win situation for all. The policyholder is happy because he got a better deal. The new buyer is happy because he is getting good returns in short period of time. In fact, the shorter the remaining term of the policy, the higher the return one would make.
Agents are also happy because they will get renewal commission,’’ said an insurance agent. ‘‘ The only flip side was it defeats the true purpose of buying an insurance cover, which is to help your dependents financially on your death.’’
Up to 40% of Ulip funds allowed in money market
You needn’t fear anymore about declining returns from unit-linked insurance policies (Ulips) that you invested in, especially when stock markets start to slide or become excessively volatile. Life insurers will now have the option to withdraw funds from the equity market and invest to the extent of 40% of an individual policyholder’s fund in money market instruments that offer a relatively stable return on investments in the short term.
In order to enhance flexibility of operations of unit-linked policies, Insurance Regulatory and Development Authority (IRDA) has just allowed life insurers to invest 40% of an individual policyholder’s funds in money market instruments. Earlier, this was capped at 20%. Money market instruments refer to commercial paper, treasury bills, government of India securities with unexpired maturity up to one year, call money, certificates of deposit, subordinated bonds corporate deposits and any other short-term instruments specified by the Reserve Bank of India (RBI).
Analysts said that insurers could park their funds in the short run to hedge against downside risk in equity markets, or in case of falling bond prices. Insurers will, however, have to educate policyholders on the implications of parking funds in such instruments. Senior analysts with a private insurer said, “These instruments provide insurance companies with the option of shifting from government securities and bonds with a longer tenure to short-term ones if the interest rates start to climb. Bonds and government securities with long-term maturities tend to underperform when interest rates rise. Instruments with short term maturity in such scenarios tend to perform relatively better than the ones with longer maturity.”
IRDA chairman CS Rao said: “The insurers were asking for an enhancement in the limit because they wanted to park larger quantum of fund in case the stock market starts fluctuating. This was done with the view to offer policyholders the flexibility of investment and offer better returns on their Ulip policies.”
This option, incidentally, was already available when insurers were allowed 20% investment in money market instruments. Now, with the investment threshold getting doubled insurers will have a bigger play of such instruments.
“The recent policy will allow insurers to park funds in instruments with shorter term maturity of less than a year and hedge against falling stock markets so that insurers can offer better returns to their policyholders,” they said.
Officials from a large insurance company said: “Ulips that invest a large portion of its funds in debt may, however, not be able to gain from the new guidelines because such policies already have a high exposure.”
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