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Tuesday, March 01, 2016

The carrot dangling before us


The floater policy cover increase to 30 lakhs has opened the flood gate for suggestions and opinions. One school of thought says it is a clever marketing strategy by the insurer to mop up premium income and one should not succumb to that. This has created a storm in the tea cup.

Group insurance being one year renewable contract the premium is not constant but rather mercurial. There are two factors which decide the renewal premium via the average age of the group and the claims experience in the group. The average age gets stabilized to the advantage of the group when fresh new entrants at relatively younger age join the insurance. But in LIC after automation the recruitment has become sporadic and therefore the fresh entrants have dwindled thereby affecting the average of the group at every renewal date. Secondly if the claims experience is favorable there could be reduction in premium on the renewal date and it is the other way when the claims experience of the group is unfavourable.Thus the premium on the renewal dates is rather mercurial. For people in the age group of 70-75, 75-80 and thereafter the motion of premium increase gets accelerated. This factor has to be born in mind by those falling in this age group opting for 20 lakhs cover. The following factor comes into play in exercising your option for the increased cover:-

Your present age, older you are be prepared for hike in premium in future and think whether it is affordable taking into account your current financial commitments.

Your present state of health. People afflicted with critical illness like stroke, uncontrolled diabetes, BMI > 30. Coronary artery disease, genetic factor affecting longevity and certain other diseases requiring surgical intervention now or later and due to efflux of time these diseases get aggravated involving heavy medical expenditure.

Affordability. Have you to pay the enhanced premium at the cost of sacrificing your basic and essential day to day needs and live in discomfort at the displeasure of your family.

The financial support you can expect from your family members and from your own resources if you were to cough up heavy medical expenditure beyond your existing mediclaim cover

The couplets from the immortal THIRUKURAL says :

Think well and then venture to do a thing. It is folly indeed to say “We shall think about it after we have ventured in it” (CH 47-467 )

Whatever may be the matter or source heard through to perceive the truth is wisdom ( CH 43-423 )

R.K.Viswanathan