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Functions of Insurance

Learn about insurance

Functions of Insurance

During our lifetime, we’re exposed to several unexpected circumstances. These situations have a direct influence on our family and finances. All of this eventually piles up and becomes a prominent source of stress if not taken care of. Insurance comes to the rescue in such cases, the various functions of insurance revolve around taking care of the possible losses that might occur to an individual or business.

Buying insurance helps to attain security against emergencies and accidents. You have to pay small periodic amounts of money as a premium against coverage of a huge expected or unexpected loss.

These insurance premiums are also considered as the policyholder’s share in compensating the losses, although the most part is taken care of by the insurance company.

What are the Functions of Insurance?

  • Insurance helps to spread the loss over several policyholders who are exposed to the same risk.
  • The principle behind insurance is to share the loss of each member of the society based on the probability of loss to their risk.
  • It is a method to provide financial security against losses to the insured.

 

Functions of insurance are further classified into two categories-

  1. Primary Functions
  2. Secondary Functions

Primary Functions of Insurance

1.) Certainty

Better planning and administration can reduce the uncertainty of the loss you may suffer. But we can always be prepared for all the risks which we may encounter. There is always an uncertainty of when it will occur, how much loss will be incurred? This is where insurance provides you with the certainty of payment in case of a loss. The insurance company charges you a periodic premium in exchange for providing this certainty.

2.) Protection

Insurance protects you from the probable chances of loss. Nobody knows when or how much of a loss may occur. On the occurrence of it, there is a high possibility for an individual to fall into debt. The insurance guarantees payment in case of a loss. It protects you and your family from all the sufferings which may be caused. The insurance cannot prevent the risk but can provide financial aid when a mishap happens.

3.) Risk-Sharing

The loss arising from the risk is uncertain. Investing in insurance minimizes the financial pressure as all the insured individuals share the risk by paying the premium that acts a compensation for the insured individual who suffers a loss.

Secondary Functions of Insurance

Here are some secondary functions of insurance listed below-

1.) Prevention of Loss

The insurance company joins hands with other institutions which are engaged in preventing the losses of society. Reduction in loss will lead to lesser payments in premium. This means you can save more while purchasing a policy. Lesser premium invites more and more opportunities. So, the decreased premium ensures that people from various strata of society can avail of insurance easily. The insurance provides financial assistance to organizations like

  • Hospitals and testing centres
  • Fire brigade
  • Educational institutions
  • Any other organizations which are helping people recover from losses from death or damages

2.) Capital

Insurance provides capital essential for the growth of society. The funds collected from the policyholders are invested in a productive channel. With the help of investment in insurance, debts are minimized to a great extent. Industries, businesses, and individuals are benefited from the investment and loans of the insurers.

3.) Efficiency

Investing in insurance eliminates worries of losses incurred on the occurrence of death and destruction of property. This can make a person and his family worry less about the future. Such people can also devote their time and effort for better achievement for themselves and society. It enhances the efficiency within a person and also the society.

4.) Economic Progress

The insurance protects people from huge losses of damage, destruction, and death. It gives them the initiative to work hard for the betterment of society.

Insurance as a tool not just offers financial stability but contributes greatly towards the well-being of individuals. Considering the salient features mentioned above and the myriad of benefits insurance offers, it is the perfect arsenal you can choose to safeguard yourself from the uncertain risks of the future. So it would be wise to avail one today!

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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Digitization of Insurance

digitization of insurance

Digitization of Insurance (Advantages and Trends)

Like all other sectors and industries, the evolution of the online world has been a driving force for bringing advancements in the insurance industry too. The new technologies are changing the way customers and insurers interact with each other. The digitization of insurance has eased up things for the customers and also benefited the insurers in multiple ways. In the article, we’ll talk about the new trends that this digital revolution has brought into the world of insurance and how has it proven to be a boon for everyone.

Digital Trends in the Industry

The Digitization of insurance has revolutionized the entire insurance industry. The implementation of digital factors has brought about changes that have improved user experience for the insurance holders. Here are a few of the digital trends that the industry is witnessing:

1.) Online Purchase of Insurance

The facility to be able to buy insurance online has eased up things for several people. Now, people can get insured from the comfort of their homes or wherever they want. The need to meet the agents in person has been eliminated. They can read about the various policies available online and choose the one that suits their needs the best. People do not even need to take time out of their schedule to meet or talk to the insurance providers. Over the internet, they can buy insurance whenever they get time.

2.) Artificial Intelligence (A.I)

A personalized experience is what customers look forward to. The advent of Artificial intelligence has made customizing unique experiences for customers possible for insurers. Besides this, AI also takes care of the demand for high-speed and quick claim settlements along with improving the underwriting processes. AI also enables the generation of more accurate data within a less span of time.

3.) Role of social media

The insurance industry has seen tremendous growth in the past few years, and social media has played a vital role in that. Advertising over social media has made it possible for insurers to catch the attention of the youth and explain to them the importance of insurance. Social media has become one of the platforms through which customers can research on insurance companies, their offerings and also read reviews.

4.) Chatbots

AI Chatbots quickly generate the answers to the frequently asked questions. Most of the insurance companies on their websites or apps have activated Chatbots. This helps the customers to save time and get more information quickly. It also increases the scope for the customers to go through the various policies and products offered by the insurance company.

5.) IoT or Internet of things

IoT is an interconnected network of digital devices enabling insurers to take initiatives to improve their services. Through this technology, insurers can get access to a huge amount of data related to the policyholder’s and their target audience’s life. This can help them create new products and make changes as per their consumer’s requirements.

Advantages of Digitization of Insurance

Insurance companies know that utilizing the latest technologies and tools is the best to provide an exceptional experience to their customers. Let’s look at the few advantages that digitization has to offer:

1.) Cost Reduction

Digital processing has helped in cutting the brokerage cost. It also aids in cutting the cost of advertising, operating expenses, and infrastructural costs. This is because digital advertising is a lot less costly than traditional advertising and since everything is now digitally done, insurers can reduce their amount spent on infrastructure and other aspects and in turn lower the operating cost as a whole.

2.) Assures Safety

As the insurance industry is eventually going digital, the chances of loss of the policy papers or other documents are eliminated to a great extent. Also, the documents, policy papers, or forms that are submitted online can be accessed from anywhere and at any time. Digital transactions also reduce the chances of information leaks and miss-selling.

3.) Convenient Transaction

Modern customers require quick and easy settlements of their needs and responsibilities. Online transactions make settling various insurance-related processes convenient. Things like the renewal of policies, payment of premiums, filing claims, and all the other procedures are simplified which enriches the overall experience of the customer.

4.) Post-Sales Services

The general impression that the customers are neglected after the policy has been sold has changed because of digitization. Post-sales processes such as raising claims, etc. have become hassle-free and less time-consuming for the customers. Insurance companies are also actively using their social media handles and other digital channels for promoting customers to give their feedback.

They are using these digital means to bring into notice their customer’s grievances and resolve them effectively. All of these have helped the insurers to provide better post-sales services.

As compared to the traditional ways, digitization of insurance has improved the communication between the insurer and the insured. It has led the insurance companies to accept the consumer-first business approach which has resulted in the growth of the insurance sector as a whole.

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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Difference between Health Insurance and Mediclaim

Difference between Health Insurance and Mediclaim

The systematic way to plan things is to first thoroughly know about the subject, research, and then finalize. Now, try applying this logic to buying health insurance. It is always better to know what your plan is and what it has to offer rather than buy the first plan that pops on the screen.

If you don’t know what exactly your health insurance has to offer, it may be of little use to you. It is easy to make mistakes while buying health insurance. One of the most common mistakes people make is assuming that mediclaim and health insurance is one and the same. But both mediclaim and health insurance plans have their own features. Before discussing the difference between health insurance and Mediclaim, let’s look at what mediclaim and health insurance are.

What is mediclaim?

Mediclaim is a health policy that gives you specified financial protection at the time of a medical emergency. It is a cost-effective plan in case of a health emergency. It provides financial aid in the following cases-

  • Accidents
  • In case of sudden illness or surgery
  • Any surgeries during the policy tenure

Features of a mediclaim plan

  • You can get immediate coverage up to Rs 5 lakhs for medical expenses when you are hospitalized for an accident or a specific illness.
  • The sum insured is pre-decided at the time of purchase of the policy.
  • The premium for mediclaim is decided on various factors like the policyholder’s age, gender, and geographical location along with the sum insured.
  • The mediclaim cover can be purchased as an individual plan or as a family plan. The family plan including you covers your spouse, children, and parents.
  • If you opt for a Cashless Mediclaim policy, your insurance company directly pays the hospital for the expenses.
  • If you opt for the Reimbursement mediclaim policy, the money you paid for the expense will be reimbursed by the insurer.
  • You can also avail of tax benefits on mediclaim as per section 80D of the income tax act 1961.

What is health insurance?

Health insurance is a complete insurance cover that gives you coverage for medical and surgical expenses in case of emergencies. If you have health insurance, you can pay for the expenses out-of-pocket for which you are later reimbursed by your insurance company. The insurance company settles the bill directly with the hospital in case of cashless claims.

Features of health insurance

  • Health insurance plans give you comprehensive insurance coverage including a wide variety of illnesses.
  • Health insurance has provisions for numerous add-ons coverage over the original policy.
  • You can opt for a Family Floater Health Insurance plan to cover all family members under one comprehensive policy.
  • The wide coverage of the policy pays for all pre and post-hospitalization expenses which include expenses for an ambulance, testing, MRI, CT scans, etc.
  • You can opt for a Critical Illness cover and other covers as an add-on to the original policy.
  • Health insurance provides you benefits like Outpatient benefit, Maternity Benefit, Restoration benefit, etc.
  • You can opt for a customized senior citizen health plan for your parents.

Difference between health insurance and mediclaim

Both medical and health insurance might sound similar but have many different features. Let’s have a look at some of the differences between these two insurance policies.

Basis

Mediclaim

Health insurance

Coverage offered

A Mediclaim offers coverage only for hospitalization and other expenses related to accidents and pre-specified diseases.

Health insurance offers a comprehensive cover that not only covers hospitalization expenses but also additional expenses such as annual health checkups, daily hospital cash, OPD expenses, and alternative treatments among others.

Add-ons

There isn’t any provision to inculcate add-on covers with Mediclaim.

Health insurance offers numerous add-ons covers such as Critical Illness Cover, Maternity Benefit and Infertility Cover, etc.

Sum assured

The sum assured or hospitalization cover provided in mediclaim is limited to Rs 5 lakh.

The sum assured in the case of health insurance doesn’t exceed 6 crore rupees.

Flexibility of plans

Terms of mediclaim policy are rigid and cannot be customized.

Health Insurance plans are flexible and can be customized to your preference.

Claims

In a mediclaim policy, you can keep filing claims until the sum insured is exhausted

In case of claims related to critical illness accidental disability coverage, the assured sum is paid in a lump sum. Hence such claims can only be made only once during the policy tenure.

Other insurance claims can be filed as long as the sum insured isn’t exhausted.

Availing the benefits

To avail of the mediclaim benefits, the insurer must get hospitalized. 

In the case of claiming health insurance benefits, hospitalization is not necessary. Benefits like daycare procedure cover can also be availed by the insured without getting hospitalized.

So, which one should you choose, mediclaim or health insurance?

Now that we know the benefits and differences between health insurance and mediclaim it should be easier for you to make the choice. If you’re still confused here are some factors that you should consider before buying any of the two health policies.

  • Consider the current health issues that you and your family are dealing with such as blood pressure, diabetes, arthritis, cancer, any other serious illnesses, etc.
  • Consider the age and lifestyle of your family members before opting for any plan.
  • Buy health insurance if you prefer investing for long-term protection and mediclaim if you prefer short-term investing.
  • If you need flexibility in your health plan options, go for health insurance otherwise you can also choose to take up a mediclaim.
  • If you need extensive add-on covers and benefits for your current health conditions, prefer buying health insurance over a mediclaim.
  • Health insurances have a higher premium than mediclaim. Make the decision according to your budget.

Mediclaim and health insurance are both ways of mitigating health-related risks. Before you decide to buy any of the insurance plans, analyze your insurance expectations and compare various insurance policies available in the market. The best insurance plan is the one that fulfils your needs. Use the information to your advantage and choose the plan that suits you better.

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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Deposit insurance Coverage

Deposit Insurance Coverage by DICGC

How safe is your deposit if your bank undergoes a crisis? Who guarantees that you won’t lose the money deposited in the bank? Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI is set up to insure the deposits held by the banks. They also guarantee credit facilities. Deposit insurance coverage is a facility that provides protection cover against losses to deposit holders in banks in case the bank fails financially. Amount to be paid as a premium or this policy is covered entirely by the insured bank for all the depositors.

Types of banks insured by DICGC

  • All commercial banks including local area banks and regional rural banks are insured.
  • Branches of foreign banks functioning in India.
  • All-State, Central, and first cooperative banks are covered by the DICGC.

What is insured under the deposit insurance coverage?

  • Savings deposits, term deposits, and RDs are insured by DICGC.
  • Government and inter-bank deposits.
  • Foreign Government deposits.
  • Single and joint accounts to be separately insured, as per RBI.

Exclusions by DICGC

  • Deposits of State co-operative banks and state land development banks are not covered.
  • Primary cooperative societies are not insured under the Deposit Insurance Coverage.

What is the maximum amount insured?

₹ 5 lakhs is the maximum limit up to which a particular depositor is insured. It is applicable for both principal and interest amounts held by the depositor.

How to know whether your bank is insured by the DICGC or not?

Printed leaflets are given by the DICGC while registering the banks as insured banks. These leaflets display information concerning the protection offered by the corporation to the depositors of the insured banks. In case of doubt, the depositor should make a specific inquiry to the bank in this regard.

Under what circumstances is the DICGC liable to pay?

DICGC is liable to pay when a bank goes into liquidation. DICGC is liable to pay the claim amount within two months from the date of receiving the claim from the liquidator. The liquidator is required to disburse the claim amount to every insured depositor.

In case of a merger, the DICGC pays the insured bank the difference between the full amount of deposit or the limit of insurance cover, whichever is less.

It also makes payment of the amount received by the bank under the reconstruction scheme. The amount can be claimed within two months from the date of receipt of the claim list from the transferee bank.

Deposits held in the same name or are under a similar type of ownership at the same bank are added together before deposit insurance is determined. The deposit insurance coverage limit is applied separately to the deposits in the respective banks if any depositor has holdings in more than one bank.

Before opening a bank account, it’s imperative to ensure that the bank is protected under deposit insurance coverage. As with this insurance coverage, your hard-earned money and savings are protected from any kind of unwanted losses.

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Definition of insurance

Definition of insurance

To choose the right kind of insurance for yourself, you must first understand what insurance is. It is necessary for you to know the right definition of insurance and its components. In this article, we’ll be offering an in-depth detail of insurance which will definitely give you a clear picture of it!

Let’s dive in.

What is the definition of insurance?

Insurance is a contract of indemnity, in which an individual or an organization receives financial compensation or reimbursement against the losses from the insurer. It is a shield used to protect the insured against the risk of monetary losses due to the damage caused. Insurance covers the policyholder for the losses incurred to him, his property, or any third party that might have suffered in the event.

There is a huge number of insurance policies offered by various insurance companies that provide coverage for different risks. Each of these policies have different terms and conditions that differ depending on the type of insurance and the company offering it. With such varied options available in the market, through deep research one can easily find a policy that suits his needs and fits his budget.

Components of insurance

There are a few components that are common for every kind of insurance policy. They are:

1. Premium

Premium is the amount that the policyholder has to pay as a consideration for the coverage offered in the policy. It is regarded as the insured’s share for covering up the losses. The insurance premium is determined by calculating the risk covered. The higher the chances of risk, the higher goes the premium.

2. Policy limit

It is the maximum amount that the insurer will pay for the damages caused to the insured on the occurrence of the event mentioned in the policy. Policies that have a high limit, have higher premiums. For life insurance policies, the maximum amount that the insurer will pay is known as the face value. This amount is paid to the beneficiary on the happening of the contingency, that is the death of the insured.

3. Deductibles

While understanding the terms and conditions of the policy, an individual must be extremely careful and attentive while going through this part. A deductible is the amount of loss that the insured is required to pay out of his pocket. These losses are excluded and not compensated under the insurance cover.

These deductibles differ from policy to policy and insurer to insurer. Generally, policies with a large number of deductibles carry less premium value as the policyholder has to pay a major part of the amount from his side.

The most common types of personal insurance policies that are offered by almost all insurance companies are auto, health, home, and life insurance policies. Out of these car or auto insurance is a compulsion by law. Moreover, there are other policies offered by financial institutions that cover the risks of businesses too! From your health to your profession, insurance has got you covered in every aspect of your life!

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Characteristics of Insurance

Characteristics of Insurance

There are a number of things written and said about insurance that highlight the benefits, features, and more of the money lending facility. However, out of the most discussed topics, one of the topics that is not talked much about is the characteristics of Insurance.

We might all be aware of what insurance is, what it offers, and why we should opt for it, but how many of us really know its characteristics? Not many. Having knowledge about the characteristics helps to get a better understanding of insurance which today has become a must-have.

So, without further ado, let’s explore the characteristics of insurance.

1. Insurance is a personal contract

Insurance is a contractual agreement between the insurance company and the policyholder. This contract is bound by certain obligations that both parties are required to fulfil to keep the contract legal. These obligations state that the insured is required to pay a premium to the insurer regularly. Furthermore, the insurance provider needs to compensate the insured for the losses mentioned in the policy. Also, the insurance contract is non-transferable without the consent of the insurance policyholder.

2. Sharing of risk

Premium paid by the policyholders is used by the insurance company to recover the losses incurred by insured individuals. It helps in reducing the burden of heavy losses on a single individual in case of any contingency. This way risk of a single individual is pooled among different individuals and its effect of the loss is minimized.

3. Cost Of Risk

The cost of risk is the value of an object which is insured under the insurance policy. Insurance companies properly evaluate the value of the subject matter before entering into a contract. Proper valuation of the insurance object helps the insurer in the calculation of the right premium amount to be paid by the insured. The higher the risk associated with the insured object, the higher will be premium charged and vice versa.

4. Insurance gives assurance of compensation

Insurance policies assure the policyholder that compensation will be provided to you in case of losses and damages. Insurance companies guarantee the protection of the policyholders and assure to bring them back on their feet post the damages. This sense of relief for the insurer motivates them to invest in insurance policies.

5. Insurance contracts are executory

This means that compensation is paid to the insured only on the occurrence of the contingency. The agreement states that the insured is liable to claim compensation from the insurer only if he incurs losses. The insurer is not liable to pay any compensation in case there are no losses to the insured.

6. Subject to disclosure

This means that any misrepresentation or concealment of facts from either the insurer or the insured will make the insurance contract void. The policyholder is required to disclose full information regarding the insurance object without any omission or mistakes. Similarly, insurance companies must explain clearly the terms and conditions of the insurance contract to policyholders.

Insurance contributes greatly to the well-being of individuals. The characteristics of insurance mentioned above and a variety of benefits, make insurance a wise investment.

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Blockchain in Insurance

Blockchain in insurance

For years, the traditional insurance business model has proven to be rock solid against changes. Many policies are still printed on paper. Consumers are still calling by phone to purchase new policies. However, the insurance sector is now beginning to imbibe the digital revolution. Emerging technologies are changing the way consumers interact with businesses and how products and services are delivered. Blockchain is one of those coveted technologies.

Strategies implemented by companies such as IBM and Enterprise are helping blockchain push the boundaries of multiple industries including Insurance. Blockchain in insurance would automate the underwriting and claims settlement process, thus making it easier, faster, and convenient.

What is blockchain?

Blockchain is essentially a decentralized and distributed system. In this particular system, the records and transactions can be exchanged, verified, and signed without the intervention of a central party. Conducting business through such means paves the way for transparency, trust, and security. Something that couldn’t be attained through the traditional way of working.

How does blockchain work?

Imagine a never-ending network of spreadsheets across computers all over the world. Blockchain is the network that is designed to update this spreadsheet periodically. The various blocks on the blockchain consist of digital pieces of information which exist in three parts.

  • The first is information about transactions like date, time, and amount of purchase.
  • The second is stored information about the participants of the transactions.
  • The third is stored information that differentiates one block from the other.

Whenever any blockchain transaction occurs, the process generally includes these steps-

  1. A new block is created to highlight the transaction.
  2. The block is verified through every participant of the network.
  3. Cryptocurrency or any other “proof of work” signifier is attached to the block.
  4. The block created is added to the existing chain.
  5. The network is updated after the addition of the block and the transaction is finalized.

Blockchain technology can offer a myriad of benefits to not just insurance but other industries too. Automation in document transfers, contract term negotiations, and increased cybersecurity are some of the primary benefits of blockchain technology.

Applications of blockchain technology in insurance


Property & casualty insurance

Property and casualty insurance includes a variety of insurance such as car, bike, commercial, and home insurance. Significant manual entry is required in processing claims for huge amounts which leaves room for human error. Using blockchain technology could make claims processes faster and cheaper. By using smart contracts and shared ledgers to issue insurance policies, the claims and payment processes can be automated.

Detection of fraud and prevention of risks

The outdated methods of the insurance industry contribute significantly towards potential fraud and errors. To combat this, blockchain can help insurance companies store claims information on a ledger. This would help companies communicate and identify suspicious behavior.

Advantages and disadvantages of blockchain in insurance

The introduction of blockchain in the insurance sector can have enormous benefits to both companies and their customers. However, just like any other thing blockchain too has its own set of pros and cons.

Advantages of blockchain in insurance

The advantages of blockchain technology are as follows:

1. Increased efficiency

So many processes in the insurance industry are manual and time-consuming. Blockchain can streamline this process by reducing paperwork and reconciliation for insurance contracts.

2. Enhanced trust

Blockchain uses cryptography in all its transactions. This makes sure that the transactions you make are authenticated, secured, and verifiable, which ensures to protect customer privacy.

3. Claims processing

Blockchain allows to collect essential real-time data and conduct in-depth analysis. This would help to speed up the processing of claims and pay-outs.

4. Smart contracts

Smart contracts are software that will be a very useful tool in the claim approval process. These smart cards will also help in immediate pay-outs to the customers once the claims are approved. This software checks for certain transactions in the network and automatically executes actions if pre-specified conditions are met. These smart contracts will reduce paperwork on the back end and will also be cheap to use.

Disadvantages of blockchain in insurance

The disadvantages of using blockchain technology are as follows:

While blockchain is a hopeful futuristic solution it comes with its own set of obstacles. Here are some of the disadvantages of using blockchain in the insurance sector.

1. Cyberattacks

The increased popularity of blockchain has garnered it some widespread attention. Many new users are embracing this technology every day. But with this increased usage blockchain is becoming more prone to cyber-attacks which ultimately puts customer security at risk.

2. Loss of integrity of data

With millions of transactions made every day, the validity of every blockchain transaction must be considered. This brings into question fraudulent insurance transactions. Therefore, all possible measures would be required to be undertaken in order to protect the integrity of customers’ data.

3. Cost of operations

The increasing popularity of blockchain will result in the technology becoming expensive. Insurance companies might find it difficult to afford this new technology for everyday processes.

4. Privacy

Blockchain is available in the public domain. This means that every blockchain transaction can be traced back to its original block. The information being available to the public can be a potential privacy threat to the customer. Criminals can access this data and exploit it to their advantage.

5. Legal issues

Insurance companies must adhere to the current regulatory and legal hurdles before fully adopting blockchain technology. There are a number of blockchain features that are in violation of current insurance laws. For instance- customer’s personal data and their policy information on the blockchain must comply with existing privacy and data protection regulations.

While blockchain technology looks promising, it is still in its infancy. No one can predict the true power of this technology. Blockchain can provide insurers with better tools and make insurance processes convenient for users.

However, the introduction of the technology would demand the old standards and insurance processes to be optimized to. The insurance industry has high privacy and security concerns and with rapidly growing customers, these concerns are bound to grow.

Insurance companies must provide clear regulations in order to safely utilize blockchain technology. With time and a better understanding of the technology, these changes can be implemented. But once blockchain comes into its own, this technology is sure to transform the insurance industry giving it a new meaning and upgrade.

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Army Group Insurance Fund (AGIF)

Army Group Insurance Fund (AGIF)

The army constantly protects us from any external or internal threats and keeps our country safe. To ensure the safety of the people who protect us, an army group insurance policy was introduced in the year 1860. The army group insurance fund (AGIF) was introduced to fulfill the following objectives-

  • Providing financial help to the families of the army personnel who were martyred during service.
  • Providing maturity benefits as a lump sum at the time of retirement.
  • Providing any other benefits that may be introduced in the policy by the Board of Governors periodically.

In the initial years, AGIF had just two schemes which increased gradually according to the needs of the army jawans and their families. Life insurance cover, disability benefit, maturity benefit, post-retirement extended insurance scheme, etc. are some of the schemes introduced in the AGIF for better financial coverage of the jawans and their families.

The life insurance coverage under this insurance was Rs 30 lakhs for the officers and for the personnel below officer rank (PBORs), it was Rs 15 lakhs. But in April 2011, the life insurance coverage was increased by Rs 10 lakh and Rs 5 lakh for the officers and PBORs respectively.

After this, the annual premium amount payable for jawans was increased to Rs 2000 from Rs 1000. For the Officers, the annual premium amount was increased to Rs 4000 from Rs 2000.

Benefits offered by the Army Group Insurance Fund

Along with providing financial help, the army group insurance fund also provides a variety of additional benefits. They are as follows:

1. Extended insurance scheme

This scheme was introduced under AGIF to provide insurance cover to servicemen after the completion of their service. As of 2014, the revised extended insurance provides coverage of Rs 10 Lakhs and Rs 5 lakhs for officers and the PBORs respectively. The extended insurance is valid for a period of 26 years after retirement or 75 years of age whichever is earlier.

2. Maturity benefits

The maturity benefit is an added bonus paid to the servicemen upon completion of the service. In case of death of the person, the family receives the maturity benefit along with added death benefits.

3. Disability cover

While at service, army personnel are exposed to various risks due to which they might end suffering from an injury or disease. This might make them unfit for service. Under the policy, in case of 100% disability, an amount of Rs 25 lakhs and Rs 12.5 lakhs is paid to the officers and PBORs respectively. The amount paid gets adjusted in other cases depending on the severity of the problems.

4. Scholarship scheme

Scholarship schemes were introduced under AGIF to provide an incentive to the wards of the servicemen. The scholarship scheme provides a sum of Rs 40,000 per annum for the wards of the servicemen. The scheme is applicable for the wards of senior officers, junior commissioned officers, and officers in the army welfare education society.

The soldiers and officers are posted in various locations with the harshest weather and difficult terrains to maintain the security of the country. They often get exposed to dangers that might even lead to death. The Army group insurance fund provides these superheroes of ours a sigh of relief by ensuring their family’s financial security.

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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Advantages and disadvantages of insurance

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Advantages and disadvantages of insurance

The insurance sector has experienced immense growth in the past few years. More and more people are realizing the importance of insurance, and taking up policies as per their needs.

But insurance like any other thing along with having numerous advantages has certain disadvantages too. In this article, we will discuss the advantages and disadvantages of insurance. Let’s first look at the advantages of insurance-

Advantages of Insurance

1. Financial protection

The prime function of Insurance is to provide you with financial protection in case of unexpected losses. Your insurance provider charges you with a nominal amount called the premium in exchange for providing this protection. In the case of life insurance, the beneficiaries receive the assured sum on the demise of the policyholder.

Several other insurance policies provide protection against miss-happenings like theft, fire, or natural calamities, etc. The funds received from the insurer help to continue the normal pace of life after the unfortunate events.

2. Risk sharing

We are exposed to various kinds of risks and uncertainties every day. These risks and uncertainties can cause major losses. Insurance acts as a cooperative device that shares your risks providing you with financial coverage for the same.

3. Encourages savings

In the case of life insurance, the premium paid to the insurer can also be considered as a saving, which will help the insured’s family in the future. Regular payment of insurance payment helps you to add discipline to your finances. Also, while you save money for premiums, your unnecessary expenses reduce automatically.

4. Self-sufficient

Damages to assets can lead to a huge financial loss for one, but with insurance, you won’t have to ask for financial support from anyone else. The claims will help you to manage the finances and bring back your financial stability. In case of deaths, the insurance amount can help the individual’s family to be self-sufficient.

5. Loan facility

Various insurance policies provide this facility or availing loans against the insurance policy. This loan can be obtained from your insurance company or any other financial institution. This provision can help you when you need money in an emergency.

6. Employment opportunities

Insurance has become a new age business while engaging hundreds of insurers and thousands of employees. The development of the insurance and finance sector has created many opportunities for those who have the qualification and caliber to excel in this industry.

7. Encourages foreign trade

Insurance is a device that reduces or eliminates the risk of financial losses in case of mishaps. This helps exporters and industrialists focus on the development of their business, allowing them to undertake risks and promote foreign trade.

8. Reduces inflation

An increase in prices of commodities is referred to as inflation. Reduction in the volume of money is necessary to control inflation. Money that you pay as a premium to the insurer helps reduce the market volume of money. Hence this helps control inflation in the country.

9. Develops our economy

A major part of the premium that is collected by the insurance companies is invested in sectors such as trade and industry. Such investments promote the growth of the economy as a whole.

Disadvantages of Insurance

Here are some of the disadvantages of insurance:

1. Not all losses are compensated

The insurance may not compensate for all types of losses that occur to the insured. In such cases, the insured might have to pay for the excluded losses from his own pocket.

2. Lengthy formalities

The insurance claims usually have lengthy legal formalities. This might lead to a delay in receiving the financial compensation.

3. Insurance is a business

At the end of the day, insurance companies are running a business. The companies may try to compensate as little as possible to the insured. There’s a possibility that the insurance companies may try to maximize their profits rather than the compensation amount for you.

4. Possibility of a crime

The benefits provided by insurance might tempt someone to commit crimes. This might sound disturbing, but there have been cases where frauds and scams were conducted to get the insurance claim.

5. Less ROI

Insurance policies do not offer much ROI as compared to other financial tools like shares and mutual funds.

 

Every financial decision you take has its set of pros and cons, even insurance. Choose wisely before opting for an insurance policy by considering your need, purpose and the advantages and disadvantages of insurance. You can immensely benefit from an insurance policy provided that you clearly understand its terms and conditions.

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Categories
Motor Insurance

Types of motor insurance

Types of motor insurance

Motor vehicles include two-wheelers, four-wheelers like cars and jeeps as well as trucks and busses. They are all an indispensable part of daily life. However, road transport involves multiple risks. A motor insurance policy can cover the financial losses that might be incurred during a mishap with your vehicle. Before you decide to take up insurance, it is important to be aware of the different types of motor insurance available to make a safe and well-informed choice.

Usually, the vehicles are insured at their current value in the market i.e., the IDV or Insured Declared Value. This value depreciates with time and is higher for the new vehicles than the old ones.

Here are the major types of motor insurance plans discussed in detail, this will enable you to recognize the type of insurance you need to take up for your vehicle.

Types of motor insurance based on vehicle owned:

There are different insurance policies available for cars, two-wheelers, and commercial vehicles. They are as follows:

1. Car insurance

This motor insurance is mandatory when buying a new car. It is one of the most important purchases to be made to ensure safe-guarding of the car from natural disasters, accidents, thefts, etc. Insurances also have mandatory clauses such as third-party liability which protects against claims of third-party vis-à-vis damage occurred to another person’s life or property by a motor vehicle.

2. Two-Wheeler insurance

The policy primarily looks into the insurance aspect of motorcycles and scooters. With the help of Two-wheeler Insurance, the insurer can claim damages in the case of an accident that is either caused on the road [while driving] or through some natural disaster. Claims can be made even if the concerned vehicle is subjected to theft. The insurance plan also includes personal accident claims of the concerned rider or passengers involved.

3. Commercial vehicle insurance

The insurance policy takes into consideration all types of motor vehicles used for commercial services such as buses, heavy-duty commercial vehicles, trucks, and ambulances. These insurance policies protect businesses from potential losses arising from damage to the vehicle, theft, accidents, explosion, etc. It also covers the legal liability towards third parties on account of bodily injury or property damage and death.

Types of motor insurance based on coverage

Motor insurance policies based on coverage refers to the type of insurance plan selected, which can be broken down into the following:

  1. Comprehensive insurance
  2. Third-party liability insurance

Comprehensive insurance

As the name suggests, a comprehensive vehicle insurance plan extends protection and security to the policyholders for almost any potential situation. This includes any expenses suffered by the policyholders in place of theft, accidents, or damage to the vehicle.

A personal accident cover qualifies the policyholder to claim compensation in the event of death or injury due to an accident. Comprehensive vehicle insurances allow adding on plans to the existing policy without the need to take out several policies.

What does a Comprehensive Insurance Plan Cover?

It is imperative to know the different aspects and situations that are covered by a comprehensive insurance plan.
Some of the different situations are given as follows:

  • Theft
  • Vandalism
  • Any natural disaster causing damage to your vehicle; such as earthquakes, floods, fire, and inclement weather conditions.
  • Situations of civil unrest such as riots and protests damaging your vehicle.
  • Damage caused by animals

An important point to note about comprehensive insurance plan cover is that it includes third-party insurance by default.

What does a comprehensive insurance not cover?

In the following cases, the insurance coverage won’t be extended to the vehicle or the policyholder:

  • Damage to the vehicle caused due to driving under the influence (DUI) of narcotic substances or alcohol.
  • Damages caused to the vehicle during collisions.
  • Wear and tear of an automobile.
  • Mechanical or electrical breakdown.
  • Damage to the vehicle when the driver does not have a valid driver’s license.

Third-Party liability insurance

Essentially, third-party liability insurance safeguards against the claims of damage to a third party by the insured vehicle. Hence, these insurance plans protect the interest of the policyholder.

Having a third-party cover for your vehicle helps to lower the risk of the policyholder being implicated in a multitude of situations.

How does a third-party insurance work?

A third-party insurance cover seeks to indemnify the first party against damage claims made by the third party.

There are two broad classifications of third-party insurance:

Liability coverage

Bodily injury liability covers physical injuries caused to another person by the insured. These encompass hospital care expenses, lost wages due to injury or disability, as well as death or permanent disability.

Property damage coverage

Property damage liability covers costs due to the property damage or complete loss of property. It includes claims related to the destruction of landscapes or property – mailboxes, fences, front gardens, gates, etc.

Whenever an accident takes place, the insured individual must notify the insurance company of the situation at the earliest. Some of the following crucial details need to be collected and presented to the insurance company:

  • Description of the accident along with date and time of the event.
  • Description of injuries sustained by driver and others involved.
  • Description of damage to property or vehicle.
  • Details of witnesses present at the scene.
  • Photographs collected from the accident site for evidence.


Policyholders must cooperate with the police and provide all the necessary details to ensure that a smooth investigation takes place. The insurer must make a note of the First Information Report (FIR) number, if applicable, and impart the name of the insurance company.

In conclusion, before purchasing a policy, individuals must thoroughly read the document to understand what is and is not covered under the policy. The foremost objective of an insurance policy is to protect vehicle owners against financial as well as personal and vehicular damage. The government of India has made it mandatory for every vehicle to have motor insurance before it is taken on the road.

A smart and informed decision must be made keeping all the points in mind to be well protected against unfortunate future incidents.

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