What he ended up glorifying was – Highest NAV guarantee ULIP plan. The way he was pitching the product anyone could have fallen in the trap without actually understanding the product’s nitty-gritty. I thought I must write on this subject to make people aware about the actual pros and cons of this product. (Before this, read – understanding ULIP)

Understanding Highest NAV Guarantee ULIP

Let’s understand this product with the help of ICICI Prudential’s highest NAV ULIP plan – “ICICI Pru Pinnacle Super”. Following description is taken from their website -

*Highest NAV Fund B provides 110% of the “highest daily NAV” of the fund in first 7 years, guaranteed at maturity. This guarantee is applicable only at maturity and is not available on partial withdrawal, surrender and death. There will be an additional charge for the cost of investment guarantee of 0.50% per annum. This will be made by adjustment to the NAV.

Some examples of Highest NAV ULIP products

• Birla Sun Life Insurance’s Platinum Plus II
• Tata AIG’s Invest Assure APEX
• SBI Life’s SMART ULIP
• ICICI Pru Pinnacle Super
• Reliance Life Highest NAV Guarantee Plan

All these plans offer guaranteed maturity unit price.

Is Regulator Worried?

“The concern I have as a regulator is that the communication mechanism for the highest NAV products might lead to misconceptions among buyers. Therefore, it’s a risky product.” – J Hari Narayan Chairman, IRDA

Let us understand why he has made such a remark for such a hot selling insurance product. I will try to keep it as simple as possible. However, if you have any question regarding highest NAV products, leave a comment below.

Analyzing Highest NAV Products

Concepts used

Constant proportion portfolio insurance (CCPI)

Say you have a portfolio of Rs. 100 crores on which you want capital guarantee.

You must back-calculate the amount to be invested in fixed income securities to fetch Rs. 100 crores on maturity, say after 7 years. Assume the rate of interest to be 8%. The calculation will be 100 crores/(1+0.08)^7 = 58.35 crores. Thus the remaining amount 41.65 crores (=100-58.35) can be invested in risky assets.  This is an oversimplified example to explain CPPI.  Explore the concept further on Wikipedia

Dynamic Asset Allocation

It is a highly active portfolio management strategy where the fund manager looks for more profitable instruments with respect to current market direction and performance. It involves constant/frequent adjustment of investments with respect to market and instrument performances.

Highest NAV and not highest return

First of all what the insurance company promises is the highest NAV achieved during the tenure of the policy which is generally 7 years for such plans. Highest NAV will be obvious only in retrospect. Remember in this type of policies NAV doesn’t move in sync with equity markets. Any guaranteed product works for investors who do not want a risk to their principal amount, but would like a small upside of equity. Mind the word “small”. If you are looking for a Nifty or Sensex-linked return product with zero risk, that’s not realistic. Such products do not exist.

Survive the term

One has to survive the full term of the policy to be eligible for the highest NAV. Otherwise his or her survivor just gets the fund value. Other things remaining same, this product’s fund value will be lesser than simple ULIP product because of high charges attached to this policy.

Cap on Downside as well as Upside

Good thing about this product is that your initial capital is guaranteed. The fund manager of such highest NAV products is given the liberty to invest up to 100% in equity and shift the entire 100% into debt. Initially such funds start with higher equity exposure.

If the equity market moves up and so does the portfolio, such funds are likely to keep booking equity gains and moving them into debt over the tenure of the plan. This, in a way, will ensure that the equity gains are cashed in, the NAV does not go to very high levels, and the loss on account of the guarantee, if any, is minimal. Thus, it results in increase in debt proportion and decrease in equity component. This limits the probable future return from the fund as funds cannot be transferred back to equity for higher return.

If the equity market falls, insurers will move funds into debt to protect the guarantee.

Real life situation

Source : Mint Research

The above picture proves the above points. Share your experiences of ULIP plans with highest NAV guarantee.

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1. Understanding ULIP
2. ULIPs or Mutual Funds – Comparison
3. Financial planning: Tips to help you get financial success

1. Car insurance policies – Car insurance policies vary from one provider to another; hence, it is essential that you initially make an insurance comparison of the available options. What do you need to look for in an auto insurance policy? Considerations include ease in acquiring the insurance, the fees and payment terms, benefits of the insurance package, and terms and conditions of the particular insurance.

2. Release date – It is a priority to select the insurance that can be released in just a few days’ time; if the insurance were convenient enough to acquire, then it would be able to give you what you need without waiting for a long time.

3. Amount - Insurance comparison based on the fees and payment terms can give you an idea of what you would need to pay for and how you would pay for it. Usually, car insurance can be paid for on an installment basis – making it easier on your budget. Based on your regular income, you can evaluate the payment terms that would fit your paying capacity.

4. Benefits - The benefits of the insurance simply shows you what you would be getting from the insurance package. One important benefit is the garage tie-in. If you ever get involved in a car accident, whatever fees you need to pay for will immediately be covered by the insurance – either directly (where they pay the garage) or indirectly (where you reimburse the fees) In this regard, determining which one would benefit you the most would depend on your preferences in accordance with the available policies. You also need to think about which things you actually need. Each auto owner has individual needs based on the type of car and usage.

5. Company credibility – this is very important. However low the premium and whatever the benefits offered, you must never buy auto insurance without making sure of the company’s credibility. How long has the company been in business? How big is the company? Research about the company and who is behind it. It would be better if you can check their permits as well. You should also search the net for customer reviews. You can also ask the people you know and trust about their own experiences regarding their car insurance policies.

If you have very little time in your hands, you can always search the net for information. There are several websites offering car insurance comparisons for free. Car insurance policy comparison would help you determine if a specific insurance package would be best for you. In doing so, you can possibly save more than you would normally spend, and at the same time, get the benefits you deserve.

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It is hoped that this will spell an end to the sky high car insurance premiums which are now being offered to young male drivers, with research by MoneySupermarket.com suggesting that 5% of drivers have already been forced off the road as a result of these price rises.

However, not everyone is happy about this ruling; with it expected that female car insurance premiums will rise by up to 50%. We therefore take a closer look at these regulations, which are expected to have a cross over impact on countries outside of Europe.

Mixed opinions
The ban on gender discrimination has been welcomed by prominent members of the European insurance community such as Martin Lewis from moneysavingexpert.com, who commented: “Why should one man pay more because others behaved badly?”

This once again raises the issue of discrimination, with Lewis adding that stereotyping people on the grounds of gender is actually no different from stereotyping on the grounds of race, as it doesn’t mean that everyone classed in a particular group will act in the same way. The head of car insurance at MoneySupermarket.com, Steve Sweeney, has supported this viewpoint “Ultimately, I think people should be treated fairly based on their own individual risk profile.”

However the ruling has not been welcomed by everyone, with the AA’s Simon Douglas claiming that the majority of young male drivers will not be paying enough to cover their costs following this ruling. This is due to the fact that young male drivers are statistically ten times more likely to be involved in an accident than motorists over the age of 35.

Insurance companies are ultimately forced to pick up the bill of any claims made by these young drivers, with the additional costs now set to be spread out amongst female motorists: “If insurers are not allowed to use such an important risk factor as gender, there is an increased risk that premiums won’t cover claims costs and they will need to increase prices in aggregate to compensate for the additional risk. This is bad news for motorists generally, although of course there will be winners and losers.”

A less considered viewpoint was offered by British politician Phillip Hollobone who merely stated: “we all know that women drivers are better than men”.

Cross Atlantic impact
As has been noted by Business academic Peter Dicken, we live in an increasingly globalised world. This means that financial and legal markets are becoming intertwined and that American legislators will therefore be likely to introduce similar rules in the interests of trade harmonisation. It should also not be forgotten that many insurers that operate within America also have operations in Europe, which increases the chances of trade harmonisation efforts being made.

American consumers should therefore take a close look at what happens in Europe over the coming years as a result of this ruling so that they can be better prepared in the event of it hitting America. Whether it will ultimately be a good or bad thing remains to be seen, with opinions on the morality of this case appearing to be split even amongst the most experienced car insurance experts. However, one thing which is certain is that female car insurance premiums are set to increase.

Author Bio- This is a guest post by Mark Martin. Mark is a motoring and insurance expert from the UK. He works for price comparison website MoneySupermarket.com and is therefore up to date with the latest developments within the market. Mark is a keen motoring racing enthusiast, and has followed Formula One for all of his life.

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Some extended warranties that are offered by companies do not include comprehensive “bumper to bumper” coverage. In some instances only severe electrical or mechanical failures will be covered. A person needs to check exactly what is, and is not, covered under an extended warranty before taking on the policy.

Many companies offering these packages are just selling on other company’s policies and are acting as a middle man. Therefore in some cases these agents will not have a full understanding of what they are actually selling. It is usually better to deal with a company directly and not to communicate with a middle man. That’s how you can save a substantial amount of money. It may take more time to choose the right cover but the same policy can actually fluctuate by as much as several hundreds of pounds. With the internet it is much easier and all you have to do is to compare various warranty products and get free quotes from different companies.

Extended car warranties are often referred to as exclusionary plans. This is because it is easier for the plan to state what is not covered as opposed to what is covered. This type of policy offers comprehensive coverage with many types of motoring problems covered. The consumer should be wary of partial plans that only state what is covered under the plan.

The warranties often do not cover parts and labour costs, though. These types of cost will often have to be covered by the car owner. A mechanic’s labour costs can be high so the money you have to pay out can increase rapidly. Whist your car is at the garage you may require the use of a hire car so you should check this is covered under the warranty.

If you want to purchase a car warranty policy you should examine the company offering the package carefully. Are they profitable? Can they actually provide the coverage they say? What is their standard of customer service? Companies such as these should have the appropriate licenses.

So, before signing up for an extended car warranty there is a number of issues to consider. Extended car warranty is often a good option and in the long run they can save the motorist a significant amount of money.

This is a gues post by Roger Burrows. Roger is a car insurance expert from Southampton, UK. Having worked in the industry for 16 years he now specializes in car warranties and breakdown cover. Roger enjoys motoring and his main hobby is fishing and hiking.

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1.  What is ULIP ?

A ULIP is a life insurance policy which provides a combination of risk cover and investment in equity and debt markets. Unlike traditional plans, the ups and downs of share market have a direct effect on the performance of the ULIPs.

Find out the difference between ULIP and Mutual Funds

2.  What is a Unit Fund?

The allocated (invested) portions of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund.

3.  What is a Unit?

It is a component of the Fund in a Unit Linked Policy.

4.  What Types of Funds do ULIP Offer?

Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund.

The following are some of the common types of funds available along with an indication of their risk characteristics.

Equity Funds: Primarily invested in company stocks with the general aim of capital appreciation Medium to High

Income

Fixed Interest and Bond Funds: Invested in corporate bonds, government securities and other fixed income instruments Medium

Cash Funds: Sometimes known as Money Market Funds – invested in cash, bank deposits and money market instruments Low

Balanced Funds: Combining equity investment with fixed interest instruments

5.  What is Net Asset Value (NAV)?

NAV is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the website of the respective insurers.

6.  What is the benefit payable in the event of risk occurring during the term of the policy?

The Sum Assured and/or value of the fund units is normally payable to the beneficiaries in the event of risk to the life assured during the term as per the policy conditions.

7.  What is the benefit payable on the maturity of the policy?

The value of the fund units with bonuses, if any is payable on maturity of the policy.

8.  Is it possible to invest additional contribution above the regular premium?

Yes, one can invest additional contribution over and above the regular premiums as per their choice subject to the feature being available in the product. This facility is known as “TOP UP” facility.

9.  Whether one can switch the investment fund after taking a ULIP policy?

Yes. “SWITCH” option provides for shifting the investments in a policy from one fund to another provided the feature is available in the product. While a specified number of switches are generally effected free of cost, a fee is charged for switches made beyond the specified number.

10.  Can a partial encashment/withdrawal be made?

Yes, Products may have the “Partial Withdrawal” option which facilitates withdrawal of a portion of the investment in the policy. This is done through cancellation of a part of units.

11.  What happens if payment of premiums is discontinued?

a) Discontinuance within three years of commencement – If all the premiums have not been paid for at least three consecutive years from inception, the insurance cover shall cease immediately. Insurers may give an opportunity for revival within the period allowed; if the policy is not revived within that period, surrender value shall be paid at the end of third policy anniversary or at the end of the period allowed for revival, whichever is later.

b) Discontinuance after three years of commencement — At the end of the period allowed for revival, the contract shall be terminated by paying the surrender value. The insurer may offer to continue the insurance cover, if so opted for by the policy holder, levying appropriate charges until the fund value is not less than one full year’s premium. When the fund value reaches an amount equivalent to one full year’s premium, the contract shall be terminated by paying the fund value.

12.  What information related to investments is provided by the Insurer to the policyholder?

The Insurers are obliged to send an annual report, covering the fund performance during previous financial year in relation to the economic scenario, market developments etc. which should include fund performance analysis, investment portfolio of the fund, investment strategies and risk control measures adopted

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1. ULIPs or Mutual Funds – Comparison
2. Should You Buy Highest NAV Guarantee Plans?
3. Making Your Car Insurance Cost Less

Life insurance is essentially a type of extended health insurance for your family and peace of mind in terms of the financial burdens which can afflict even young people. Modern life insurance is geared to helping people deal with difficulties which come from bereavement and it’s packaged to deal with other types of problems like income insurance, trauma insurance and disability coverage.

The things life insurance protects you against
Sadly, many people are affected by untimely deaths and injuries. Very large numbers of people are incapacitated on the roads, or in the workplace. The terrible truth is most people aren’t properly covered for these things. A death or serious injury in the family is bad enough, but when combined with loss of income, it’s a disaster.

The fact is that social security doesn’t cover these things well, if at all. Nor do most people’s savings. A serious disruption to the income balance in a family can cause havoc, and in some cases create serious financial difficulties. Life insurance is designed to deal with the financial issues and prevent these added miseries.

Other benefits- All round cover and packages
These days, life insurance is packaged with other types of insurance, like income insurance, trauma and disability insurance. This sort of package covers the full spectrum of risk management for most families and for roughly the price of a cup of coffee in some cases, you can cover everything, simply and efficiently.

This type of insurance is particularly useful for families where financial commitments pose potential risks. Mortgages, rents, school fees, there’s quite a list of expenses which, let’s face it, must be under control for peace of mind. Nobody wants to think about the possibilities of not being able to pay for these critically important things. A straightforward life insurance/income insurance and disability cover package literally manages all of the risk.

Perhaps most critically important for people looking for insurance, cover is also meas

Shopping for life insurance options
Picking the right life insurance for your needs is a lot easier than it used to be. Now you can shop online, get online life insurance quotes and discuss your needs very quickly and efficiency. The bureaucratic processes have been streamlined, and you can make good comparative assessments of life insurance policies very effectively.

When shopping for your life insurance, remember this is a very competitive industry that wants your business. Most insurance firms try hard to attract customers with good deals and good policies. This really is a buyer’s market in some ways, and the online insurers have a lot of information available to help you make informed decisions. You will get a good deal.

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1. Car Insurance: Comparing The Insurance Packages
2. Making Your Car Insurance Cost Less
3. Health Insurance Industry in India – Landscape

So what does health insurance look like today in India? To answer this question, it would be prudent to take a step backwards and figure out where does health insurance fit into the bigger picture.

Health Insurance is part of the growing healthcare industry, which itself is seeing robust growth. Growth of the healthcare industry is being driven by the following factors primarily

• Availability of quality healthcare
• Increased awareness
• Government initiatives
• Rise in number of patients visiting India for treatment, and
• Rise and growth of the middle income group in India, whose potential and size is the subject matter of major plans for many companies around the world

Let me present you with some data on how big the healthcare sector in itself is. Healthcare industry in India represents around 5% of the Indian GDP. 12% of the $77 million venture capital investments in the July – September 2009 quarter were in the healthcare sector. To further grasp how healthcare industry in India is on a growth path, consider this – the Indian healthcare industry jumped from $22.8bn in 2005 to $35bn in 2009 (CAGR of 15.3%). It is expected to rise at a CAGR of 22% and reach $77bn by 2012.

So coming back to the bigger picture, where does health insurance fit in into the healthcare industry? In 2010, health insurance was about 5% of the total healthcare market. And the rate of growth of health insurance is even faster than that of the healthcare industry, averaging a CAGR of 42% from 2003-04 to 2009-10. According to data released by Insurance Information Bureau, health insurance premiums almost doubled in 2009-10 compared to the previous fiscal. (Please do not for a moment assume that premium growth necessarily translates into more profitability for insurers – that probably would need another article by itself to explore).

The surprising fact to note is that despite this explosive growth in health insurance premium, the overall population covered by health insurance in India is quite low. Only around 10% of the Indian population is covered by some form of health insurance, which includes various government and employer covers; the retail penetration of health insurance is at an abysmal low of less than 3%. This presents a unique opportunity for health insurance per se – a growth supported by an increasing healthcare market as well as an expanding customer base. The potential is huge.

On one side lies a market which is so underpenetrated (less than 3% retail penetration), on the other side lies the explosive growth in healthcare expense (which is fuelled by the increased cost of better medical care), accompanied by government’s agenda to increase health insurance coverage (as on December 23,2010, a total of 2,23,54,462 smart cards have been issued across 27 states under the Rashtriya Swasthya Bima Yojana), coupled with increased awareness amongst the consumers that health insurance is a real need today, especially for the burgeoning middle class.

Ramneek Jaiin
*The author works as a Senior Manager in the Product Management Vertical of a global provider of insurance, annuities and employee benefit programs and manages the Health Insurance portfolio for them in India

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ULIPs as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs is allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component.

However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs.

They are as follows:

Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts during the policy’s tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one’s convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

Expenses

In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times ‘unwieldy’ expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated.

Portfolio disclosure

Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions.

Flexibility in altering the asset allocation

Offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP investor’s equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor’s marginal tax rate.

Please feel free to provide suggestion, feedback or any alteration/addition to this article. Your comments will help us in improving this article. We will include relevant comments in the body of the article (with acknowledgement)

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Remember these handy hints the next time your car insurance renewal reminder comes through, and see how the cost of your premium can fall:

Loyalty doesn’t necessarily pay

Sticking with one car insurance company year on year doesn’t automatically get you cheaper premiums. Although with many comprehensive insurance policies, you will be entitled to No Claims Bonus discounts every year, it still pays to always compare car insurance quotes at every renewal to make sure you get the best possible price.

Colour doesn’t count

You’d be amazed by how many people think that the colour of their car plays a part in how much their insurance costs. They believe red cars cost more because they’re traditionally associated with aggressive driving. But think about it, when you try to get a car insurance quote you aren’t even asked what colour the vehicle is. Insurers care about engine size, the car’s value, and the person’s driving history, but they aren’t bothered whether the car is red, blue, black or green!

New cars can be cheaper to insure

It would make sense to say that brand new cars will cost more to insure than older models, but though this is often true, it’s not always the case. Research has found that depending on driver history, it can often cost less to insure a new car than a five or ten year old version of the same model. Old cars are usually owned by younger drivers, who insurers deem a higher risk, while new vehicles are fitted with the best security and anti theft devices, making them statistically less of a target for thieves.

Higher deductibles equals lower insurance

The simplest way to reduce your motor insurance price is to increase the voluntary deductible, or excess, that you are happy to pay if you do need to claim. The higher the deductible, the lower the insurance quote, but remember you’ll also get a lower payout if you do have an accident. And only set an amount that you are able to afford to pay if the worst was to happen.

Cheapest isn’t always best

In the current economic climate, people will try and get the cheapest deal possible. But sometimes, what looks like the “cheapest” car insurance policy might not be the ideal one for you. When comparing quotes, check to see what is actually included in the policy, as many companies remove optional extras like courtesy car provision. What at first glance might seem slightly more expensive policies could provide greater value if they include these add-ons.

Security features save money

Statistics show that older cars are stolen more often than new models because it’s easier to do so – they don’t have as many up to date security features. Installing anti-theft devices like locks and alarms are a simple way to bring down you insurance premiums – many companies will even give a discount worth up to Rs 500 for doing so.

Comprehensive can be cheaper

To try and save money, many drivers will opt for a third party policy (Motor Policy A), the minimum legal requirement, as they think it will be the cheapest option. However, a growing number of studies have shown that it often works out better value to get fully comprehensive (Motor Policy B). Third party insurance is usually bought by higher risk young or new drivers, and insurers have adjusted their prices accordingly. It definitely makes sense to at least compare how much third party or comprehensive insurance will cost.

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Upside

Good News for Mediclaim policyholders. Soon portability would be allowed to mediclaim policyholder with a mediclaim policy of sum assured of one lakh or more. In simple terms, it can be compared to the much talked about mobile service provider portability. Customer or policy holders, who are not satisfied with the service of their existing service providers, will be able to switch to another insurer soon without any change in the premium outgo. However, this facility will be available to those policyholders who are insured for a sum of Rs 1 lakh and above, to begin with. It has been decided to widen the cover, according to the recommendation submitted by the General Insurance Council, an association of non-life insurers.

The policyholders will be able to switch their health cover providers with the same benefits retained once they have bought this cover.

Downside

However, under the proposed new policy, after the expiry of the term, if one intends to switch over to a new company, the accumulated bonus is not carried forward and one has to start all over again.

At present, a policyholder is given health cover for a year and the same has to be renewed every year. If there is no claim, the policyholder is entitled to a bonus in the form of increased sum and for every claim-free year, this bonus gets accumulated.

For senior citizens it becomes all the more difficult because companies are reluctant to sell new mediclaim policies to the elderly.

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