Insurance: An essential risk management tool in today's world
A financially secure future is not only about savings, investments and returns. All that we manage to save and invest may suddenly disappear, if we do not accept that all of us do need the benefits of insurance.
Hargovind suddenly collapsed and died due to a cardiac arrest, leaving his family in the lurch.
Nikita had to incur huge expenses on the medical bills of her mother, who had a pacemaker inserted, recently. Sundaram's plastic factory burned down due to a short-circuit. Rishika's car was stolen. Bhaskar Mahtani's prized race-horse suddenly died.
Unexpected contingencies can wipe out a family's investments and erode their savings. An insurance portfolio, tailored to your needs, is just as important as your investment portfolio. Insurance requirements also evolve with age and time. It is an essential risk management tool in today's uncertain world.
How does Insurance work?
We all know that Insurance is a system which provides financial compensation for a loss against payment of a premium. In a nutshell, the principle of insurance assumes that a calamity will not usually affect all persons insured at once. The risk is spread among a large enough pool so that no one person suffers the entire cost of the loss. Probability theory and the law of large numbers allows the service providers to conduct their business and the cost of compensation is shared by all participants by way of premium.
Is insurance necessary?
Insurers now cover anything from submarines to satellites and agricultural crops to the Olympics. Cars, houses, factories, laptops, mobile phones, health etc are covered. Why not protect one self and one's loved ones from unexpected contingencies, by paying a small amount to protect one's investments? Some types of insurance policies are mandated by law such as the motor third party insurance for vehicles moving in public spaces. Liability Insurance, as per Act, is also compulsory for hazardous industries in our country.
Travelling abroad often requires a Travel Policy as part of visa requirements. Loans given by banks are always covered by the collateral of insurance. Others insurances are by and large left to the discretion of the individual concerned.
An useful input for the optimist is that even insurers, who have number crunching and well paid actuaries to assist them in predicting loss patterns, also insure their own risks, as well! Nothing more needs to be mentioned for the pessimist presumably!
Must-have Insurance policies?
A life insurance policy to ensure the availability of finances even after the primary earning member's demise is essential. A comprehensive motor insurance policy for one's vehicle is a must.
A householder's package policy will give insurance protection against a variety of perils to one's house and its contents including furniture, fittings, jewellery and paintings and electronic items at a very reasonable premium. The pandemic has brought renewed urgency to purchasing a health policy for one's family. Travel policies protect the traveller on the move in India and abroad.
Business ventures have whole lot of insurance options depending on the nature of the concern.
Is it easy to buy insurance?
Yes. One can always utilise the services of licensed agents and insurance brokers to place insurance. One can even place insurance through banks, if the banks have a tie-up for some policies with insurers. Insurance can also be placed online directly with the insurers. This is a very convenient option for busy customers, who find it cumbersome to interact with intermediaries.
What about renewals?
Life insurance contracts are long-term contracts and require premium payments at stipulated intervals, unless they have a one-time premium payment option.
But general insurance contracts are usually twelve month contracts and require renewals every twelve months. It is vital to pay the renewal premium in time. In case of general insurance policies the risk is left uncovered if the premium is not paid in time, and any claims in the interim are not entertained.
For example, if my vehicle's comprehensive motor policy was due to be renewed on 1st July, 2020, but was actually renewed on 3rd July, 2020, any damage to the vehicle etc during this gap in renewal, will be left uncovered by the insurer.
There is no provision for covering unforeseen contingencies during gaps in renewal of general insurances.
What happens in case of claims?
After paying the premium one receives a premium receipt and also the policy copy from theinsurer. Please study the terms, conditions and exclusions carefully and make a physical and scanned copy and keep it in a safe and handy place. Please share this knowledge with all the family members, without fail.
Don't be at a loss when an unexpected contingency occurs. After all that is why you are obtaining insurance protection. The claims procedure and documentary requirements must be noted with attention from the policy copy. Study the insurer's website too in this regard. Feel free to use the insurer's toll-free numbers too, if necessary.
Once the insured contingency takes place, a claim has to be lodged immediately, with the insurer with a completed claim-form and an estimate of loss. If it is a property claim, then a registered surveyor would be sent by the insurer to survey the loss and prepare a survey report. The loss assessment, in terms of the policy conditions, is prepared by him and submitted to the insurers. If the insurer has queries or documentary requirements those are sought for and then the claim is paid subject to depreciation and policy deductibles, if any.
In case of health claims, if it is a cashless claim then it usually has to be lodged with the Third Party Administrator (TPA) who services the policy. (The name and contact numbers, e-mail id of the TPA etc. will be given in the policy and the insurer's web-site). After giving advance information and receiving the nod from the TPA, the customer admits himself into an empanelled hospital and the expenses are taken care of by the insurer, via the TPA. The patient is discharged after he pays the non-eligible charges and the policy deductibles.
In case of reimbursement health claims, the claim intimation has to be given immediately on hospitalisation and all the relevant documents have to be submitted for reimbursement with the bills and cash memos within a specified time frame, as per the policy.
Why are claims rejected?
Please avoid rejection of claims by following some simple steps. A Proposal Form must be filled in prior to taking insurance. As the customer's personal data is collected from his declarations in the Proposal Form, please provide the correct and true details in it. Do not allow your friendly agent or broker to fill it in, while you just sign. Provide your (not the agent's) phone numbers and e-mail.id. Suppression or incorrect information submitted in the Proposal Form will definitely lead to rejection of claims later on and maybe even, premature termination of the Policy.
Please study the policy conditions carefully. Sometimes they may not have been fully explained to you. For example, pre-existing diseases are covered in health policies generally after 4 years. So, a claim for such a disease would be rejected if made after one year. Hence, policy conditions and exclusions must be examined, to avoid unpleasant surprises later on. Rejection of claims will also take place if they have occurred during a break-in-renewal.
It is also essential to keep all documentary proofs of one's claims carefully, for submission, with copies, as no claim will be paid without adequate proof of loss. Proofs of repairs or replacement, will also be required.
However, if the customer is still dissatisfied he can send his grievance to the insurer's own grievance channels and even to the local Insurance Ombudsman for redressal. To conclude, in these troubled times with job losses and pay cuts one would be tempted to economise and default in insurance premium payments.
However, it would be unwise to do so; as insurance can be likened to the time-honoured adage that it is 'a stitch in time, which saves nine'.
THE WRITER IS FORMER MANAGER, NATIONAL INSURANCE COMPANY LTD.
