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Assess your need before signing up for extra insurance cover

Friday, 14 September 2012 02:49

Insurance cos are now launching plans with extra benefits. 


Tata-AIA Life, Bajaj Allianz, Aegon Religare and several other insurers have launched life insurance plans with a wider range of riders or extra benefits added to them. Until now, most life insurers were happy offering only critical illness and accidental death and dismemberment covers as part of their policies. However, the latest riders on offer promise to cover women-specific ailments, surgeries, waiver of premiums, among other things. Several health insurers are also expanding their coverage to include expenses over and above the hospitalisation costs. Sure, enhanced protection is always great, but that doesn't mean that all these riders should find a place in your insurance portfolio. Like every financial product, you need to carry out a detailed cost-benefit analysis before signing up for them. 


This rider was offered primarily with children's insurance products until recently. It made sense because it ensures waiver of future premiums if the parent passes away during the policy term. However, Tata-AIA Life and Bharti-AXA Life have recently started offering this rider with their term and endowment plans. Tata-AIA's premium waiver ensures that the life cover continues even if the insured suffers from permanent disability and is unable to pay the premium. Bharti-AXA's add-on, on the other hand, is triggered in the event of the policyholder's demise. However, it is only applicable in cases where the policyholder is not the life assured. For instance, a couple jointly purchases a policy, where the husband has promised to pay the premium. Typically, the cover will cease to exist if the husband dies and premium is not paid. However, if the couple has opted for this premium waiver rider, the future premiums will be waived off and the cover will continue. 


Part of Tata-AIA Life's new term plan, this rider promises to pay out a lump sum amount, subject to sub-limits, if the insured undergoes a surgery. It works like a regular critical illness rider, except that it comes into effect only on surgeries. "These are defined benefit plans, where a lump sum is paid out in case of a claim. Therefore, the policyholder can choose to use this amount to meet expenses over and above the hospitalisation costs, which are covered by the regular indemnity-based individual or group health policies," says Pankaj Mathpal, CEO, Optima Money Managers. Simply put, your basic health insurance policy will pay for hospitalisation while the new rider may help you with extra money that can be used for recuperation or to replace the income lost during the period of treatment. The same is applicable to hospital cash and womanspecific riders as well. 


A basic health insurance policy may pay for hospitalisation expenses, but policyholders often will have to pay some extra money from their pocket due to various reasons. For example, family members have to commute to attend to the patient. "The hospital cash rider hands out a pre-defined amount to the insured once a claim is made. Policyholders are free to utilise this sum for any purpose, as per their needs," says Rituraj Bhattacharjee, head, market management, Bajaj Allianz Life. These add-ons are built into several health policies as well, besides being available as separate offerings with general insurers. 


Aegon Religare's recently-launched term plan insures women policyholders against conditions like cancer of female organs, pregnancy-related complications and treatment of child with congenital disorders. Earlier this year, Bajaj Allianz General had come up with an independent product with similar offerings. The USP of these riders is that such illnesses or conditions do not fall within the regular policies' coverage ambit. 


Buying an additional cover as part of a life or health package at a discounted rate may sound like a good idea, but you need to first determine whether you need it. "A young person buying a traditional health insurance policy should buy a personal accident cover along with it. He may choose not to buy a critical illness cover as the probability of a critical illness is low in early years of life," says Rahul Aggarwal, chief executive officer, Optima Insurance Brokers.