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Nature of Insurance

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Nature of Insurance

Different kinds of insurances serve different purposes and provide coverage for multiple mishappenings. Although the benefits offered by all insurance policies differ, every insurance contract, be it for any insurance policy, shares the same nature. In this article, we’ll throw light upon the nature of insurance.

What is the nature of insurance?

Insurance is a contract between two parties whereby one party, the insurer, promises to cover the loss incurred by the other party, the insured. Based on the definition and the purpose it serves, the nature that insurance possesses is as follows:

1.) Sharing of risks

Insurance is a device that is used to divide the losses that might occur to an insured individual or his family amongst the masses. Insurance companies collect a huge amount as a premium from all the policyholders. These funds are utilized to cover up the losses that an insured might suffer during the tenure of his policy. In this way, the loss is distributed amongst a huge population, reducing the burden on the loss bearer.

2.) Co-operative device

The cooperation of a large number of people who in effect agree to share the losses is one of the prominent factors that contributes towards the nature of insurance. The insurer might not be able to pay for the losses that may arise due to a particular risk from his own capital. This is where Insurance comes to aid as it allows all the insured people to share and contribute towards the loss of an individual by paying the premium. The paid premium compensates for the financial losses incurred by the individual.

3.) Payment at the occurrence of the event

The insured is paid only at the occurrence of a certain contingency. Otherwise, no payment is made to the insured. In the case of general insurance plans, if the event does not occur in the mentioned period of time, the policy goes void. Moreover, in the case of life insurance plans also, the beneficiary is only paid at the death of the policyholder i.e., at the occurrence of the event.

4.) Insurance is not gambling

Insurance is a method devised to promote the people to undertake risk by providing financial support to them. It serves as a long-term financial resource relieving the risk-taker from worrying about the financial loss he/she might have to suffer. It is not a tool to increase the financial standing of the insured. Rather, it is a tool to help the insured attain back his/her financial position in case of an unforeseen event.

5.) Insurance is not charity

Charity is a fund given without any consideration. Insurance comes with a premium. It is not a charity but a backup plan to offer financial security to the policyholder. A premium has to be paid by the policyholder according to the risk that has been covered under the insurance plan.

Insurance gives the insurance holder peace of mind and relieves him of the financial stress that might be caused due to unexpected circumstances. This allows the insured individual to devote himself completely towards accomplishing his/her goals. Hence, insurance today is not just a facility but more of a necessity.

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Life Insurance vs Health Insurance

Life Insurance vs Health Insurance (Understanding Key Differences)

If you are someone who likes to secure their future, you must have stumbled upon these two terms- life insurance and health insurance. These insurance policies work as a blessing in case of unexpected emergencies. It is usually recommended to purchase both these policies for a strong financial portfolio. Although, these two things might sound similar but are very different from each other. Before diving deeper into studying life insurance vs health insurance, let’s take a brief look at what these two policies are.

What is Life Insurance?

Life insurance is a long-term policy that ensures the safety of your family. In case of the sudden death of the policyholder, his family is provided financial security. The death benefits under this policy offer a lump sum amount to the family. This amount is decided at the time of purchasing the policy. Life insurance offers a wide variety of benefits. Let’s take a look at them.

Benefits of a Life Insurance Policy

1. Financial Security to the Family

In a life insurance policy, the money provided to the family after the death of the insured eases the financial pressure on them. This money can be used for daily expenditure or a bigger expense like children’s education or marriage. It can also be used to clear off any debt. This much-needed financial help supports the family to get back on their feet.

2. Retirement Planning

Life insurance plans also have a provision of providing pension coverage. The premium for the plans which include this pension coverage work on periodic annuity payments. This comes in handy for senior citizens and provides them with much-needed financial help after retirement.

3. Maturity Benefits

Life insurance also provides a bonus amount under maturity which is received upon completion of the policy term. You have an option to invest the money from the maturity benefits into various streams like shares, equity, etc. This way you get returns along with life protection all in a single policy.

4. Encourages Savings

The premium for life insurance policies has to be paid regularly without any default. This makes you save some amount of your income towards paying these premiums. Whether you do it voluntarily or by compulsion, this inculcates a habit of saving money. This habit of saving money and investing in insurance helps you financially in the long term.

5. Tax Benefits

If you buy a life insurance policy you are eligible to avail of some tax exemptions. These exemptions are applicable if the premium amount paid for the policy exceeds Rs 1.5 lakhs. So, investing in a life insurance policy gives you a double benefit of life cover and tax savings.

What is Health Insurance?

Health insurance is a short-term plan that provides health coverage for any sudden illnesses. This protects the insured from various expenses that might arise due to the illness and its associated treatments. Health insurance offers a plethora of benefits. Let’s have a look at them.

Benefits of Health Insurance

1. Useful in Medical Emergencies

Due to our sedentary lifestyle, we are prone to various diseases. The diseases arising from a bad lifestyle like type 2 diabetes, heart conditions, etc. lead to huge hospital bills and mental stress. When you don’t have enough money for these expenses you tend to opt for substandard healthcare services. Health insurance gives you a sense of financial security and doesn’t let you compromise on the quality of health care.

2. Inflation and Health care

Inflation in layman terms means an increase in the prices of services and commodities. Like all other industries, the medical industry is also gets affected by inflation. This leads to an increase in costs of hospital bills, medical tests, medicines, surgeries, etc. Investing in health insurance protects your savings from these expenses.

3. Wider Coverage

When you think of health insurance, you might think it only covers hospitalization charges. But it covers much more than that. Health insurance has additional coverage for ambulance charges, maternity benefits, surgeries, special treatments, doctors’ fees, etc.

Life Insurance vs Health Insurance

Now that we have understood what these policies are, let’s take a look at the differences between the two policies.

Basis

Life insurance

Health insurance

Coverage offered

Life insurance offers comprehensive coverage which covers a variety of expenses. The coverage is offered throughout the life span of the insured.  

Health insurance only provides medical emergency cover in case of a sudden illness. This cover includes expenses for medicines, hospital charges surgeries, etc.

Premium amount

Life insurance premiums are flexible and depend on the type of policy you choose.

Health insurance premiums are evaluated by the insurers considering various factors, thus they’re comparatively high.

Policy tenure

These policies have fixed tenure and the policy is terminated upon the completion of the tenure.

Health insurance policies do not have fixed tenures. The policy can be renewed annually by the insured to enjoy the benefits.

Financial assistance offered

Life insurance offers financial protection mainly to your family in case of your demise.

Health insurance offers financial assistance to you in a health-related emergency.

Benefits

Life insurance policies offer a death benefit where the family members receive money if the insured dies. The policy also offers a maturity benefit after the completion of the policy term.

Health insurance offers a maternity benefit for expecting mothers which takes care of all the expenses at the time of childbirth.

Refund upon term completion

Life insurance offers a full refund of the amount invested if you outlive the policy term.

Health insurance does not offer any refund at the end of the policy term.

So which Insurance Policy should you opt for?

The benefits provided by both these policies are immense. With so many lives and health insurance policies available, it might be difficult to choose one of them. If it is feasible financially, you can opt for both policies. But if you had to choose one, choose wisely by analyzing the stage of life you are at. Choose the policy which will be beneficial to you right now and you can purchase the other one later. Make sure to compare different plans for both insurances before investing in one.

AUTHOR BIO

This article is written by Team InsuranceLiya.com, an independent website that writes about insurance, finance, health, and more. Our writers have a wealth of knowledge, experience, and degrees in the fields of insurance, finance, economics, and beyond.

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Insurance vs Assurance- A Detailed Comparison

Insurance vs Assurance- A Detailed Comparison

In the financial market, insurance and assurance are two very widely used terms. The two terms, although have different meanings, are used by people interchangeably. This is because both of them are related to protecting the financial interests of individuals, families, and corporations. It is important for one to know about the difference between insurance and assurance in order to make the right decisions while making financial plans and purchases.

Before we discuss ‘insurance vs assurance’ it is important to know the exact meaning of both the terms individually.

Insurance

Insurance is a contract or agreement wherein the insurance company indemnifies to compensate for the insured’s losses. In case of any mishaps, man-made or natural calamities, or any other uncertain event, the insurance company provides coverage for the losses. This compensation is given in return for a premium paid by the policyholder.

Assurance

It is an agreement in which the insurance company assures to provide compensation or remuneration for an event that is certain to happen, for instance, death. Assurance policies promise to provide persistent coverage till the death of the policyholder.

Insurance Vs Assurance

Let’s understand the difference between the two on various parameters.

Basis

Insurance

Assurance

Meaning

It provides compensation for temporary losses.

It provides compensation for losses that are irreversible and irreplaceable

Objective

To help the policyholder regain financial stability and overcome the unforeseeable losses.

Provide compensation to the beneficiary for his loss.

Guiding principle

The principle of indemnity forms the basis of insurance.

The Principle of certainty forms the basis of assurance.

Types

All general insurance plans, such as fire insurance, marine insurance, health insurance, etc are an agreement of ‘Insurance’.

Life insurance plans, such as annuity plans, whole life insurance, endowment plans, etc (except term life insurance) are a type of ‘Assurance’.

Payment of the claim

The claim is paid only on the happening of the event. If the event does not take place before the maturity of the policy, the policy becomes void.

The sum insured is paid to the policyholder on the occurrence of the event or on the maturity of the policy.

Duration of the contract

Insurance plans are generally short-term plans that can be renewed after their tenure expires.

Assurance plans are long-term contracts, covering the entire lifespan of the policyholder.

Coverage

Coverage is offered against events that may or may not occur in the future like, fire, etc.

Coverage is provided against events that are definite to occur like death.

Payment of premium

In an insurance contract, the premium is paid periodically to get protection against the insured risk.

In a contract of assurance, the premium is paid periodically to avail the benefits after the happening of the event.

Insurance and assurance, both of these elements are extremely and equally important to have a financially sound life.
Although they go hand-in-hand, there is a difference between the services or coverages offered by both. Both of these contracts are offered by the insurance companies, you must rightly choose the one that matches your needs.

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Insurance for Professional Indemnity

Insurance for Professional Indemnity

As a business professional, you strive to provide your clients with the best services. But if any kind of errors, omissions, or professional neglect occurs from your end, then you are liable for the losses incurred by the clients. This might result in the client filing a case against you. Whether you are an architect, engineer, doctor, lawyer, chartered accountant, etc. you need to protect your business against such legal claims. This is where professional indemnity insurance helps you.

Insurance for Professional Indemnity saves you and your business from the financial claims made by your dissatisfied customers regarding faulty products, bad service, etc. It also offers valuable assistance and helps to save money as all legal charges are taken care of by the insurance company.

Key benefits of professional indemnity insurance

  • This insurance policy can be specially designed for the requirements of different professionals and professional services.
  • Provides exhaustive coverage against different risks for several businesses.
  • Covers all the legal expenses and costs incurred with the prior consent of the insured.

Factors affecting the cost of professional indemnity insurance

Depending on the type of sector or industry the business belongs to, the cost of the indemnity cover is decided. Some of the factors that are kept in view are listed below:

  • The risk factor involved in the business
  • Location of the business
  • How old is the business
  • Yearly turnover
  • Number of employees in the company
  • Number of clients of the company
  • Credit score
  • Previous history of claims

What does this policy cover?

Professional indemnity insurance protects you and your business against claims of error, omission, or negligence in a professional service where a client has incurred losses. Loss can be monetary or in the form of death or bodily injury to a person in the case of a medical professional. This type of policy covers all claims related to the incidents which occur within the policy period. An owner is responsible for not only his negligence but also for his employees. Such incidences may or may not occur under the direct supervision of the owner. Hence the policy has a provision to insure the professional and his associates or employees too.

What does the policy not cover?

  • Criminal activity, violation of law, or fraud by the company or the owner are not covered.
  • Damage caused under Influence of intoxicants or narcotics.
  • Weight reduction treatments like liposuction, mesotherapy, etc.
  • Cosmetic surgeries like botox surgeries, hair transplants, facelifts, etc.
  • Treatments of HIV and AIDS.
  • The policy does not cover non-compliance with statutory provisions.
  • Businesses involving radioactive materials.
  • Damage caused by wars.
  • Trademark infringement, design patents, copyright issues.

Insurance for professional indemnity helps you pay the clients and protect your professional image. The policy also protects you from the hefty legal fees in a long-drawn-out legal battle. It also provides you with a second opportunity to correct your mistake and make improvements while continuing your business in the market. It is thus wise to get professional indemnity insurance today to protect your business and its image from the trouble that accidental damage to your client might cause.

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Understanding Insurance for Gold

Understanding Insurance for Gold

Gold is one of the most valuable pieces of jewelry you can own. Whether it may be a necklace or a wedding ring, these coveted ornaments have a high sentimental value. But gold is more than just jewelry, it is a great investment. Along with real estate and stocks, gold is one of the most popular choices of investment for many people. Also, gold ornaments have a high resale value and can be used to procure money in emergency situations.

Given its monetary worth, this jewelry should be protected from any unwanted risks. gold insurance is always a good idea to protect your jewelry from theft, loss, or damage.

Let’s dive a little deeper and know more about the Insurance for Gold!

Inclusions under Gold Insurance

The gold insurance offers protection to your jewelry in the following scenarios:

1. Fire

A fire at your house or any other place of storage is one of the main causes of damages to jewelry. But there is a provision in the insurance to protect your jewelry from this damage.

2. Burglary & Theft

The insurance covers your jewelry from theft or burglary and protects you from emotional and financial stress.

3. Natural calamities

The insurance protects your jewelry from any damage caused by natural calamities like earthquakes, floods, storms, hurricanes, etc.

4. Location

You can opt to store your jewelry at home, in shops, in lockers, or in exhibitions. If any kind of damage mentioned above occurs at the place of storage, it gets covered under the insurance.

Exclusions under Gold Insurance

Here are some exclusions under which the jewelry is not covered.

1. Wear and tear

Damage caused to the jewelry by normal wear and tear or during cleaning, servicing, and repairing is not covered under the insurance.

2. Negligence

Sometimes the jewelry is damaged due to reckless handling by the owner. In such cases, no financial compensation is provided.

3. Replacement

If you wish to replace the old insured jewelry with a new one, then the insurance policy does not get transferred to the new item. Only those items that were listed at the time of taking the insurance are covered.

4. Non-disclosure

You are bound to provide accurate information about the jewelry while purchasing the insurance policy. If you fail to provide correct information about your jewelry and any kind of damage that happens to it, it will not be covered by the insurance.

5. Confiscation

If you choose to take a loan for the purchase of jewelry, you are required to pay regular EMI’s. If you default the EMI payment and the jewelry gets confiscated, the insurance company is not bound to pay for your loss.

If you are someone who prefers investing in gold, it is necessary for you to add a layer of protection around your investment. Gold along with being a safe investment also helps you to get emergency money, which makes Insurance for Gold all the more necessary. Always make sure to compare various insurance covers and their benefits before buying one.

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Insurance as an Investment

Insurance as an Investment

While planning your personal finances, insurance is a must thing to be considered. This is because it helps you to be prepared for the uncertainties that might come your way. But in addition to acting as a reliable financial assistance tool, it is also considered to be an optimal source of investment. How do you ask? Here’s how Insurance as an investment aids you in a plethora of ways:

Top 5 benefits

1. Safety shield for your family’s future

We invest to receive returns that will be beneficial for us and our loved ones in the future. Insurance serves the same purpose but in a better way. Money invested in insurance policies is at extremely low risk and is sure to offer returns. In your absence, your family can utilize this money to make up for the financial loss and maintain a stable, healthy lifestyle.

2. A financially independent retired life

A few insurance policies provide for a fixed monthly, quarterly or yearly income after the premium payment period is over. Investing in such policies can help you to have a happy, secured, and financially independent life after retirement.

3. Tax benefits

Under section 80C of the income tax act, insurance policies are subjected to provide tax benefits. Tax benefits up to Rs. 1.5 lakhs can be availed by an individual. This clears the picture of insurance as an investment as it helps in saving money on taxes.

4. Disciplined and regular investments

A policyholder needs to compulsorily pay the premiums at fixed intervals, as per the frequency opted by him. This helps in maintaining and inculcating a habit of regular investment for a long period of time. Insurance doesn’t just instill discipline but
also makes you plan your expenses in a better way and relieves you of the burden for future savings to some extent.

5. Dealing with financial liabilities

During mishaps, the situations already are too exhausting and stressful. In such times, insurance can relieve you from worrying about financial issues. It can help you cover up for your losses and pay back loans. It helps in preventing any disturbances in your financial plans, avoids draining you of your savings, and assists you in maintaining a healthy lifestyle.

When it comes to choosing the right insurance plan, keeping in mind the investment aspect, ULIPs can be a great choice. This is because they are flexible enough and allow you to smartly invest your money in the right places such as equity shares, debt instruments, and bonds.

ULIPs prove to be an extremely advantageous financial tool as they help the investor in tax saving, ensure regular saving and investments with good returns. Along with investments you can also enjoy the benefits and security of an insurance plan. The investor also does not have to put in much effort in monitoring the market conditions.

This work is done by the investment managers at the company. All the investor has to do is select the kind of investment he wants to make, the rest is taken care of.

As an individual, it is our responsibility to invest and arrange for our family’s well being and safe future. Insurance serves the function of a smart investment, helps us save, and ensures financial security. This makes it an essential part of our monetary and stability planning.

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Insurance Act 1938

Insurance Act 1938

There are several acts introduced to guide and govern the functioning of Insurance institutions. From the abundance of acts present, one of the prominent ones is the Insurance Act, 1938. This article will discuss the Act highlighting some important points such as its history and features it holds.

What is The Insurance Act 1938 and its history?

The insurance act was introduced to regulate the activities of insurance companies. This act prevents companies from being speculative and forces them to act on sound actuarial principles. Before the original insurance act 1938, a life insurance company’s act was passed in 1912. The drawback of this act was that there was discrimination between Indian and foreign companies.

Indian companies were required to make deposits with the government. But the foreign companies were exempted from this rule. This led to resentment amongst the Indian companies against the British government. The success of the independence and non-cooperation movement helped the Indian insurance companies. The Indian insurance companies then became the face of the swadeshi movement. The total insurance business grew from 22.44 crores in 1914 to 298 crores in 1938. India also saw an increase in the number of insurance companies from 44 to 176 in the same period.

A committee was appointed by the government of India to study this problem and find solutions. The result of this investigation was the Insurance Act 1938. It was the first comprehensive legislation passed by the government. This act governed both life and non-life companies providing strict control over the insurance business.

Features 

The salient features of the Insurance Act 1938

  • Forming a department of insurance to overlook all the insurance business.
  • Mandatory registration of insurance companies.
  • Compulsory submission of annual financial returns of insurance companies.
  • A provision for initial deposits was made to allow only genuine companies in the insurance sector.
  • Other important provisions such as the prohibition on rebate, restriction on licensing, and commission payment were introduced in order to instill professionalism into the business.
  • Insurance companies had to go through a periodical evaluation to assess their financial stability.
  • Policies with a standardized format were introduced.
  • Certification of the premium tables through an actuary was made compulsory.

After the implementation of the legislation-

  • Promotions were given to those who were worthy.
  • Speculative insurance was eliminated and
  • Reductions in bankruptcies of insurance companies were notices.

In due course of time, various shortcomings were found in the insurance act. Changes regarding deposits, rebates, and investments were made. But this boom of the insurance industry was hampered by the partition in 1947. Many insurance companies were affected due to the widespread bloodshed. Amongst this situation, the foreign companies found it difficult to function. By 1955 the share of foreign companies in new business was a mere 7 percent. Out of 105 foreign companies, only 15 remained.

In 1950, further amendments were made to the insurance act. The superintendent of insurance was re-designated as the controller of insurance. The controller of insurance even had the authority to check the books of the insurer. Amends were made in provisions relating to investments in life funds. Investments in government and approved securities were brought down to 50%. Restrictions on the nature of investments in balanced funds were imposed. Only 15% of total funds were allowed to be invested in the open market. The Insurance act 1938 played a major role in making insurance a public utility service.

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Importance of Insurance

Importance of Insurance

The world we live in is extremely uncertain. A risk at any step we take is unknown. All of us, our families, and our businesses are exposed to different types of risks at different levels. Although these risks cannot be predicted or controlled, insurance acts as a precaution and protection for us against the unexpected.

Therefore, the importance of insurance is non-negligible and unsurpassed. It has evolved as a tool for safeguarding the financial interest of people and their well-being.

6 Top Importance of Insurance 

Let’s have a deeper look at the importance of Insurance and know why is it necessary to have one:

1. Provides financial safety and security

It gives financial support to businesses and individuals against the losses or damages that might occur in the future. It acts as a shield against events that might disrupt the financial planning of an individual or organization.

2. Acts as a financial resource

Insurance generates long-term financial resources from the premiums it collects. Since these policies are payable in the future, the funds generated through premiums are invested and utilized in the economic development of the country. Roads and other infrastructures that help in nation-building are constructed out of these funds. These investments result in the growth of employment opportunities in turn helping the capital formation in the country.

3. Encourages savings

Life insurance policies can be looked upon as a channel of investment and saving too. These policies ensure regular savings, that are invested in the form of a premium. A lump sum of these premiums altogether is paid to the insured on the maturity of the contract. This is a way in which one can collect a good amount of funds that can be in the future, utilized by the insured or his/her family members.

4. Builds confidence in individuals to take up risks

Insurance provides an aid for the losses that might occur if one starts or expands his business. This develops a sense of security in an individual and gives him a motivation for undertaking the risk. It also gives a push to invest more funds and ensure proper working of the business, overcoming any financial constraints that the business might suffer otherwise.

5. Provides support during Medical Emergency

Health issues are a very big concern for most people today. Medical expenses and costs of treatments are rising day by day and are high enough to drain a person of his savings. Medical insurance provides coverage for various illnesses. Nevertheless, nothing can compensate for the immense mental pressure in such situations. Financial support can ease things to some extent.

6. Distribution of risk

The basic role of insurance is to shift the risk from the insured to the insurer. The insurer collects funds, in the form of premiums from a huge number of people. Whenever there is a requirement of funds by an insured, it is compensated from the funds collected. This helps in the distribution of risk amongst a huge population.

In a country like ours where savings and security both need to be insured, insurance has proved to be of great help. It channelizes people’s savings and offers them security. The vast development of the insurance industry and proper utilization of its funds have also created a huge number of employment opportunities. Thus, insurance has proved to a blessing and support for the economy too.

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How are insurance premiums calculated?

How are insurance premiums calculated?

When you get an insurance policy, the company charges you a certain amount of money against the coverage. This money that you pay to the company is called the insurance premium. You might pay the premium every month or on a semi-annual basis, depending on your insurance policy.

While purchasing any policy, we do not have much control over the insurance premium amount as it is determined by the insurance firms. However, the question- how are insurance premiums calculated and what are its key deciding factors might have crossed your mind.

Well, we have an answer for that! Let’s understand the cost of the premium and how it is calculated.

How much does an insurance premium cost?

Insurance premiums have no set cost. Various insurance policies have different insured sum and coverage and hence can have varied premiums. For instance- a 5 lakh health insurance policy will have a lower premium as compared to a 50-lakh health insurance policy. But this doesn’t mean that you opt for insurance with the lowest premium. Assess your need and financial condition before opting for insurance.

How are insurance premiums calculated?

Insurance companies consider different factors while calculating premiums. Here are a few of them:

1. Age

Age is a major factor while deciding insurance premiums. People below the age of 40 generally have lesser health problems and generally get the best premiums. People above the age of 40 have more health issues like diabetes, arthritis, cancer, etc, and pose a higher risk to insurers. Hence these people are usually charged higher premiums by the insurer.

2. Type of coverage

You are offered several add-on coverages like zero depreciation, maternity cover, critical illness covers, etc. on specific insurance policies. The more comprehensive coverage you opt for, the more expensive the premium will be. For instance- if you have a car insurance policy that covers liability only, it will have a cheaper premium. If the same car policy accounts for comprehensive coverage, liability, and medical payments the premium will automatically be higher.

3. Amount of coverage

The sum insured under the insurance coverage is a key factor in deciding premiums. If your total insured amount is less, the premiums for that insurance will generally be lower and vice versa. For instance- if you purchase a home loan of Rs 60 lakh, it will have a high premium than a Rs 25 lakh home loan.

4. Actuarial tables

Actuaries are business professionals that assess the risk of financial loss using mathematics and statistics. Insurance companies hire these actuaries to predict the likelihood of an insurance claim. After the assessment of the possible losses, actuaries produce something called an actuarial table that is provided to an insurance company that uses it to set policy premiums.

5. Whole life vs Term life insurance

An insurance policy that provides coverage until the death of the insured is called a whole-of-life policy. A term insurance policy offers cover only for a fixed number of years. Whereas, a whole life policy offers coverage generally across the expected life span of the individual.

For whole life insurance, the premium is paid generally for the first 10-15 years while the coverage is offered for the entire life of the policyholder. The payment of premium is limited to a specific period and therefore the premium charged for whole life insurance is on the higher side. On the other hand, term life insurance provides coverage for a specified period like 5 years or 10 years wherein the premium amount to be paid is fixed. This results in the premium charges being lower.

6. Number of dependents on the insured

Children and parents are dependent on the earning member of the family who is also the policyholder. The number of family members dependent on the insured plays a role in calculating the premium amount. A higher number of dependents means more protection is needed which translates to a higher premium.

7. Occupation

Your occupation might play a role in calculating the premiums if you decide to purchase an insurance policy. Some occupations such as pilots, soldiers, offshore oil or gas industry workers are deemed riskier than others by the insurance companies. If you are a professional working in the above-mentioned fields, you can expect higher premiums compared to those working in a comparatively safer environment.

8. Income

One of the vital factors to determine the amount of premium is the sum an individual earns. Premiums are to be paid regularly to the insurer without any defaults. Insurers evaluate your income to determine if you will be able to afford regular premium payments.

9. Debts

If you have ongoing loans, mortgages, or have unpaid credit card bills, the insurance institutions consider these things as debts against the insured. These debts might have a direct impact on the premium you pay for the policy. There might be situations, where you might even be denied to avail a policy because of these debts. It’s therefore suggested to clear them in order to get a policy as per your requirement.

10. Operating cost of the firm

Insurance companies spend a huge amount of money to maintain an online presence through ads on various websites and social media. The insurance companies promote their product i.e. the policies through these channels. The money spent on this comes under marketing expenses. The insurance company also bears non-marketing expenses like maintenance, rent, salaries, legal fees, agent’s commission, etc. These marketing and non-marketing expenses make up the total operational costs of the insurance firm. This operational cost affects the insurance premiums the company charges to the policyholders.

11. Interest on investments

As an added investment, insurance firms invest the policyholders’ premiums in bonds, stocks, real estate, etc. The insurance company earns a specific rate of interest on the invested funds. This interest earned on these investments may vary as per the fluctuations in the market. It is yet another important factor that is considered while deciding the insurance premium.

These factors affecting the insurance premiums vary from policy to policy. Understanding how insurance premiums are calculated will help you immensely when you are looking for your next insurance policy. To get the best coverage for you and your family at affordable prices, you must take the time and effort to do online as well as offline research.

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Group Personal Accident Insurance

What is Group Personal Accident Insurance? (Explained)

The employees are the greatest asset of a company. However, they’re exposed to several risks. It’s one of the organizations’ responsibilities to look after the employee’s well-being. Group personal accident insurance offers the company a policy to protect its employees from any accident that occurs at the workplace. Under this policy, the employees are absolved of all the medical expenses incurred due to injury or death in case of any mishappenings.

Group personal accident insurance is a win-win for both the company and the employees. While the employees are protected under the policy, the company gets a group discount based on the number of employees in the company.

Benefits of Group Personal Accident Insurance

Here are some of the benefits of the Group Personal Accident Insurance policy-

  • The policy fulfils the basic responsibility of any organization is to protect the employees against any unfortunate events.
  • It assures quick claim settlement for the employee.
  • It also provides hassle-free documentation.
  • It is great for the reputation of an organization as it gives satisfaction to the workers that the company ensures their protection.
  • All the expenses related to hospitalization and medicines due to the injury get reimbursed.

Coverage offered by Group Personal Accident Insurance

A group personal accident insurance coverage varies according to the terms of the plan.
Here’s what the coverage includes-

  • The family receives the insured compensation in case of the death of the insured.
  • In case of permanent or total disability caused to the employee which continues for over 12 months, the entire compensation is paid to the person insured.
  • If the employee gets disabled partially, a certain percentage of the sum insured is paid.
  • Weekly benefits are provided to the employee who is fully disabled. It is offered to compensate for the loss of salary as the employee would be unable to work.
  • If hospitalization is necessary for the employee, ambulance charges are covered under this policy.
  • The policy will reimburse all the expenses that arise during the transportation of the insured person’s mortal remains to the ground or home.
  • In case of broken bones, the insured gets compensated a certain amount of money.
  • The policy covers the educational costs of the children if the insured dies or has a permanent disability.
  • In case of permanent disability, the insured may need some changes in lifestyle such as modifications to his car and home which is compensated by the policy.

Group Personal Accident Insurance Exclusions

Group personal accident insurance protects all employees against most accident scenarios. But there are some exclusions that the policy does not cover. Some of the notable exclusions are:

  • When the injury is self-inflicted.
  • Injuries caused due to illegal or criminal acts.
  • Injuries/damages sustained under the influence of alcohol, drugs, or other intoxicating substances.
  • Death or injury due to illness or disease during childbirth or pregnancy.
  • Accident cases involving nuclear weapons or armed forces.
  • Accidents involving a violation of the law.
  • Suicides or attempted suicides.

Accidents not only cause financial trouble for the employee’s family, but they may also affect the company in a way. It’s thus advisable to insure your employees with Group Personal Accident Insurance and provide them with the financial security they deserve.

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