Saturday, February 22, 2020

Car Insurance Full Guide

Car Insurance means insuring the financial risk involved while operating the car. The car might meet with any damages, accident or may be lost or stolen. In such a situation the losses borne by the owner may be compensated by the insurance company if the same is covered under auto insurance policy. Under the provisions of Auto Vehicles Act all the vehicles, which are operating in public places should have a car insurance policy at least to cover third party liability as specified under the Act. It means that the car insurance must cover the third party in case of any accident. It may or may not cover the damages of the owner of the car.
Car Insurance Full Guide
There are 2 types of car insurance policies.

Third Party Car Insurance Policy

This type of policy only covers the third person who has been damaged or injured in an accident where the owner is accountable. It covers the insured person's liability to third parties' loss caused by an accident involving the auto vehicle of the insured. This refers to the minimum risks that are to be covered under the Auto Vehicles Act 1938 (Act Liability). It doesn't cover the expenses, damage, theft or injuries of the owner. This type of plan is made compulsory by the law of India.

Comprehensive Car Insurance Policy

This type of plan has a wider scope and covers all the above mentioned liability along with the insured person's damage, theft, expenses and injuries in result of an accident of the auto vehicle. This type of policy can be extended to increase benefits as an additional feature. It is advisable to opt for a comprehensive motor insurance policy as it covers the repairing costs of the damage caused to your car also.

Zero Depreciation Cover

In case you need to replace some parts of your car, the car insurance plan pays you the depreciated value of the part and not the invoice value of the part. In case you have opted for a Depreciation Cover, you would be paid the actual price of the part and not the depreciated value. Insurance companies usually offer this value added cover for cars which are a maximum of 2 to 3 years old. This benefit comes with a small increase in premium.

Emergency Assistance

There are a variety of assistance which insurance companies offer as add-on covers. These include emergency transport, daily allowances, assistance if you run of out fuel, assistance in case of a flat battery, towing facilities, taxi benefits to name a few. Some are offered as freebies and some are charged as part of the annual premium itself. Small measures which can actually be very handy when you are stranded.

Invoice price cover

In case of a "total loss" of your car due to severe damage, the insurance companies will pay you the depreciated value of your car and not the price to purchase a new car. If you opt for this add-on cover, you effectively receive an amount to purchase a brand new car. Companies also pay the road tax and registration costs with this cover. It is also called the "Return to Invoice" cover. This too is available only for cars which are 2 to 3 years old and can be availed by paying extra premiums.

Keys and Locks Replacement Cover

In case the keys to your car are lost, this will cover the costs of replacement. In case new locks need to be procured, this will cover that cost also. Usually this is available only once during a policy period.

No Claim Bonus Protection

In case you have not made any claims in your policy, you get discounts on renewal in the form of No-claims Bonus. This can lead to substantial savings in your renewal premium. In case, you have accumulated a good No-claims bonus %, this add-on cover will protect your against the loss of this bonus in case of a claim you make. You will be able to carry on your NCB % on renewal.
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Max Life Online Term Plan Plus

Max Life Online Term Plan Plus is another plan which is popular with customers. Being a term insurance plan, it offers large cover at low premiums. The plan is aggressively priced and offers 3 basic variants. Of course, you can add riders to make the term plan very comprehensive.
Max Life Online Term Plan Plus

The plan has 3 variants to choose from:
  1. Basic Life Cover - Nominee will get the Sum Assured on death of the policyholder
  2. Basic Life Cover + Monthly Income - Nominee will get the Sum Assured on death of the policyholder + nominee will get a monthly income of 0.4% of Sum Assured for the next 10 years
  3. Basic Life Cover + Increasing Monthly Income - Nominee will get the Sum Assured on death of the policyholder + nominee will get a monthly income of 0.4% of Sum Assured for the next 10 years. The monthly income increases by 10% simple interest every year.
We will understand these variants better with the help of examples later.

All the above variants have these attractive additional benefits which can be taken to make the plan more comprehensive and offers you some flexibility. You may need to pay extra premiums for these benefits.
 
  1. Pay til 60 - You can choose to pay till the age of 60 years and enjoy the life cover till the end of the policy term. Basically make premium payments only in your working days and enjoy the cover without any financial burden in your retirement days. Good option in my opinion. 
  2. Option to increase cover amount at important milestones - You have the option to increase your life cover once you are married, when you have children or when you are taking a home loan. This option needs to be selected at the time of making the purchase. Then as and when you increase the cover, additional premium would be calculated basis your age and amount of additional cover.
  3. Accelerated Critical Illness Benefit - On being diagnosed with a list of 40 critical illnesses, you will get 50% of the Sum Assured (max 50 lakhs) and the balance cover will continue. You don’t have to pay any of the future premiums. I strongly recommend taking this.


Key Features

  • Completely online application process
  • Choice of 3 death benefit options
  • Choice of Max Life Comprehensive Accident Benefit Rider and Max Life Waiver of Premium Plus Rider
  • Tax benefits on premiums paid u/s 80C

Key Benefits

  • Death Benefit:The death benefit under Max Life Online Term Plan Plus is highest of:
    • 10 times the annualised premium
    • 105% of all the premiums paid as on date of death
    • Minimum guaranteed sum assured on maturity
    • Absolute amount assured to be paid on death
      Under this Plan, the ‘Minimum guaranteed sum assured on maturity’ is zero. Further, absolute amount assured to be paid on death will depend on the Death Benefit option chosen by the Life Insured at inception of the policy.
      • Option 1) Sum Assured:100% of the policy Sum Assured as chosen at inception of the Policy, paid immediately on death of Life Insured.Effective Total Protection Value: 100% of Sum Assured
      • Option 2) Sum Assured plus Level Monthly Income:100% of the policy Sum Assured as chosen at inception of the Policy, paid immediately on death of Life Insured.Plus
        0.4% of the policy Sum Assured per month, for 10 years 
        Effective Total Protection Value: 148% of Sum Assured
      • Option 3) Sum Assured plus Increasing Monthly Income:100% of the policy Sum Assured as chosen at inception of the Policy, paid immediately on death of Life Insured.
        Plus
        Increasing monthly income for 10 years wherein the first year monthly income shall be 0.4% of the policy sum assured and shall increase every year by 10% p.a. (simple interest) of the first year monthly income.
        For e.g.: A policy with Sum Assured of Rs. 1,00,00,000 is sold on 10 January 2016 and the Life Insured dies on 25th June 2016. In this case, the first monthly income will be paid on 10th January 2017 (i.e. the first Policy Anniversary post the date of death of the Life Insured) and thereafter on 10th of each month, for a period of 10 years. 
        Effective Total Protection Value: 169.6% of Sum Assured
Following table illustrates the monthly income payable to the beneficiary:

Time PeriodMonthly Income payable on 10th of each month
10 Jan 2017 till 10 Dec 2017Rs. 40,000
10 Jan 2018 till 10 Dec 2018Rs. 44,000
10 Jan 2019 till 10 Dec 2019Rs. 48,000
10 Jan 2020 till 10 Dec 2020Rs. 52,000
10 Jan 2021 till 10 Dec 2021Rs. 56,000
10 Jan 2022 till 10 Dec 2022Rs. 60,000
10 Jan 2023 till 10 Dec 2023Rs. 64,000
10 Jan 2024 till 10 Dec 2024Rs. 68,000
10 Jan 2025 till 10 Dec 2025Rs. 72,000
10 Jan 2026 till 10 Dec 2026Rs. 76,000

Notes:The monthly income will be payable each month on the anniversary date, starting from the first Policy Anniversary post the date of death of the Life Insured.
For e.g.: A policy is sold on 10 January 2016 and the Life Insured dies on 25th June 2016. In this case, the first monthly income will be paid on 10th January 2017 (i.e. Policy Anniversary following the date of death of the Life Insured) and thereafter on 10th of each month, for a period of 10 years.

Under ‘Option 2 – Sum Assured plus Level Monthly Income’ and ‘Option 3 - Sum Assured plus Increasing Monthly Income’ mentioned above, you have the option to commute the outstanding income payments at any point in time. You will have to submit a written request for the same to the Company. On receipt of such a request, the Company shall pay present value of all future monthly incomes discounted at the rate of 5.5% p.a. to you.
  • Maturity Benefit:There is no maturity benefit or surrender benefit under the plan.
  • Tax Benefit:Premiums paid towards this plan up to Rs.1,50,000 will be entitled to benefits under Sec 80C of the Income Tax Act.
    The proceeds on and after death of the policyholder to the nominee will be tax exempted under Sec 10(10D).

Riders

The following riders are available with Max Life Online Term Plan Plus:
  • Max Life Comprehensive Accident Benefit Rider: This rider provides additional cover by way of rider Sum Assured in case of Death or Dismemberment (impairments are listed under the Rider contract) due to accident. This rider needs to be added at the time of purchase of the base policy.
  • Max Life Waiver of Premium Plus Rider: Get waiver of all future premiums under a policy and all other attaching riders on happening of earlier of either of the following events provided the base policy and attaching riders are in force:
    Critical Illness; or
    Dismemberment; or
    Death (only when Life Insured and Policyholder are different individuals, rider benefit will be paid on death of the Policyholder)
Note:
1) Total rider premium cannot be more that 100% of the base plan’s premium (including extra premium, if any)
2) Under Comprehensive Accident Benefit Rider, the rider Sum Assured cannot exceed base plan’s Sum Assured.


Eligibility and other Conditions

 MinimumMaximum
Entry Age18 yearsRegular Pay - 60 years
Pay till 60 - 50 years
Maximum maturity Age85 years
Annual PremiumRs.2,200Rs. 2,18,44,600
Sum Assured25 lacs100 crores
Policy Term1050
Premium Payment TermSame as policy term
Premium ModesYearly, Half-yearly, Quarterly and Monthly
 
So let us understand this plan better with the help of a few examples.

# 01 - Basic Life Cover

Suppose Sooraj Nath from Mumbai has taken this plan with Basic Life Cover. He does not consume any form of tobacco.

Age - 30 years
Cover Amount - 1 crore
Policy Term - 35 years

His annual premium will be Rs. 9,204 which he has to pay for 35 years.

Benefits under this option are:
  • Lumpsum payment on Death - Sooraj’s nominee will get Rs. 1 crore in case he dies anytime during the policy term and the policy is terminated.

# 02 - Basic Life Cover + Monthly Income

Suppose Sooraj Nath from Mumbai has taken this plan with Basic Life Cover + Monthly Income. He does not consume any form of tobacco.

Age - 30 years
Cover Amount - 1 crore
Policy Term - 35 years

His annual premium will be Rs. 12,272 which he has to pay for 35 years.

Benefits under this option are:
  • Lumpsum payment on Death - His nominee will get Rs. 1 crore in case he dies anytime during the policy term and the policy is terminated.
  • Monthly Income - His nominee will get Rs. 40,000 every month for the next 10 years.

# 03 - Basic Life Cover + Increasing Monthly Income

Suppose Sooraj Nath from Mumbai has taken this plan with Basic Life Cover + Increasing Monthly Income. He does not consume any form of tobacco.

Age - 30 years
Cover Amount - 1 crore
Policy Term - 35 years

His annual premium will be Rs. 13,570 which he has to pay for 35 years.

Benefits under this option are:
  • Lumpsum payment on Death - His nominee will get Rs. 1 crore in case he dies anytime during the policy term and the policy is terminated.
  • Monthly Income - His nominee will get the following monthly income for the next 10 years.
 
Year 1Rs. 40,000 monthly
Year 2Rs. 44,000 monthly
Year 3Rs. 48,000 monthly
Year 4Rs. 52,000 monthly
Year 5Rs. 56,000 monthly
Year 6Rs. 60,000 monthly
Year 7Rs. 64,000 monthly
Year 8Rs. 68,000 monthly
Year 9Rs. 72,000 monthly
Year 10Rs. 76,000 monthly


In case, the nominee wishes to get the future payments in lumpsum, that too can be done. The present value of all future payments discounted @ 5.25% will be paid out.


# 04 - Basic Life Cover with Pay till 60 option

Suppose Sooraj Nath from Mumbai has taken this plan with Basic Life Cover + Pay till 60 option. He does not consume any form of tobacco.

Age - 30 years
Cover Amount - 1 crore
Policy Term - 35 years
Premium Payment Term - 30 years

His annual premium will be Rs. 9,676 which he has to pay for 30 years. He does not need to pay premiums for the balance 5 years of his term. So no payment after retirement age.

Benefits under this option are:
  • Lumpsum payment on Death - Sooraj’s nominee will get Rs. 1 crore in case he dies anytime during the policy term and the policy is terminated.

# 05 - Basic Life Cover with Option to increase cover at important milestones

Sooraj will have to select this option at the time of making the purchase. He will then have the option of increasing the cover in the event of any or all of the following:
  • Marriage (only once!) - can increase by 50% of Sum insured; Max 50 lakhs
  • Child Birth (twice only) - can increase by 50% of Sum insured; Max 25 lakhs for each child birth
  • Home loan (only once) - can increase by 50% of Sum insured; Max 50 lakhs
The following conditions will have to be met while availing this option:
  • Your base policy should be of 50 lakhs or more
  • You should have paid 3 years of premiums continuously
  • You have to avail this before you complete 45 years of age (last birthday)
  • Only 1 increase can be done in a year
  • You have to increase the cover each time by at least 25 lakhs
  • The overall increase is capped at 50 lakhs
  • No medical tests required when you do this increase

# 06 - Basic Life Cover with Accelerated Critical Illness Benefit

Suppose Sooraj Nath from Mumbai has taken this plan with Basic Life Cover + Accelerated Critical Illness Benefit. He does not consume any form of tobacco.

Age - 30 years
Cover Amount - 1 crore
Policy Term - 35 years
Critical Illness Cover - 10 lakhs (He can choose upto 50 lakhs of cover).

His annual premium will be Rs. 12,886 which he has to pay for 35 years. 

Benefits under this option are:
  • Lumpsum payment on Death - Sooraj’s nominee will get Rs. 1 crore in case he dies anytime during the policy term and the policy is terminated.
  • Accelerated Critical Illness Benefit - Sooraj will get a lumpsum payment of Rs. 10 lakhs in case he is diagnosed with any of the 40 critical illness listed below. The balance 90 lakhs cover will continue with a reduced premium value. Also note the following:
    • In case of angioplasty only 5 lakhs is payable
    • This benefit is applicable only till the age of 75 years
    • The benefit is applicable for a maximum of 40 years
    • There is a waiting period of 90 days for this benefit

Click here for the list of 40 Critical Illness covered in Max Life Online Term Plan Plus Accelerated Critical Illness Benefit.

If you have any questions on this plan, please comment below and we will be happy to share our thoughts.

Additional Details

Surrender

The policy does not acquire any Surrender Value throughout the Policy Term and therefore there is no amount payable to you upon surrender.


Revival

A lapsed policy can be revived by you within 2 years from the due date of the first unpaid installment of the premium and before the expiry of policy term. The revival of policy shall take effect only after approval by the Company as per the Company’s Board approved Underwriting Policy and will be communicated to you in writing, only if:
i) You give us a written request;
ii) You produce an evidence of insurability of Life Insured acceptable to us and bear the cost for the same; and
iii) You pay all overdue Premiums with late payment fee and/or interest at such rates as may be determined by the Company from time to time.

Grace Period

A grace period of thirty (30) days from the due date for payment of each premium will be allowed for all premium paying modes except for monthly mode, where a grace period of only fifteen (15) days will be allowed. During the grace period, the Company will accept the premium without interest.

Free Look Period

The company offers a period of thirty (30) days from the date of receipt of the policy document, to review the terms and conditions of the policy, where if you disagree to any of those terms and conditions, you have the option to return the policy stating the reasons for your objection. The premium paid will be refunded to the policyholder post a deduction of a proportionate risk premium for the period of cover and the expenses incurred by the Company on medical examination of the life insured and stamp duty charges.
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Tuesday, February 11, 2020

What Is Money back plan

Money back plans provide both of savings and life cover. In this plans a certain amount of the sum assured is being given to the individual at regular intervals during the policy period. The balance amount is being paid during the maturity of the plan. If the policy holder dies during the policy period the nominee would get the sum assured as well as the bonus amount if any. Moreover the cash payout received at regular interval is exempted from tax. The amount of payout, terms of the policy, depends on the policy that one has opted.
Money back plan

The major difference between an endowment and money back policy is endowment policies do not provide returns at regular intervals. Only the survival benefits are paid at the time of maturity.
To explain further - The endowment plans pays the money, which includes the sum assured (or cover) and bonus, on the maturity of the policy. Money back policy, on the other hand, returns money usually as a fixed percentage of the sum assured to the insured during the term of the policy at some regular frequency (e.g. 5 years)
How does money back plan work?
Suppose a person takes a money back plan for 15 years with payouts of 25% of the total sum assured after every five years and rest of the sum assured at the end of the 15th year along with the additional bonus amount. So by the end of the 10th year the individual would have received 50% i.e. 25*2=50% of the total sum assured and on the completion of the policy term, the individual would have received 50% of the total sum assured plus any additional benefit if any announced by the insurance company at the time the policy was bought. The plan can also have higher term periods for ex: 20 or 25 years.
Types of bonuses
Bonuses applicable in endowment with profits and money back policies are different types as below. Bonus payment are determined and declared by life insurer if they make surplus funds after claims, costs and expenses have been paid in a particular financial year.
Simple Reversionary bonus (SRB) This type of bonus is calculated on the sum assured only. This bonus is declared annually and is accrued to be paid out at the time of a claim or maturity.
Compound Reversionary bonus (CRB) CRB is calculated as a percentage of the sum assured and all previously accrued bonuses. The bonus of each year is added to the sum assured and the next year's bonus is calculated on the enhanced amount.
Terminal Bonus
Terminal Bonus is also known as persistency bonus which is paid once, i.e. at the time of maturity of the policy. It is a sort of loyalty bonus given to a policyholder for maintaining the policy till maturity. Its value is not guaranteed and will be disclosed only at the time of policy maturity.
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