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Overall charges capped at 3% of net yield for Ulips of 10 yrs or below

Online term insurance policies are bought over the internet directly from the insurance company, whereas normal are bought through intermediaries like agents and brokers.

What is the difference between online term insurance and normal term policies. What is the claim rejection ratio between these two types of policies?

? Amitabh Sharma

Online term insurance policies are bought over the internet directly from the insurance company, whereas normal (offline term policies) are bought through intermediaries like agents and brokers. Offline term policies are costlier due to commission and higher administration costs associated with them. Online term plans are 25-30% cheaper. Separate claim rejection ratios for both categories are not available though Irda publishes it for companies as a whole. However, claims ratio for online policies will be lower due to better healthcare facilities available for tech-savvy customers who mostly opt for these plans.

Is it advisable to take a home insurance policy to protect my property from fire, quake or any unforeseen disaster?

? Prateek Kumar

A standard fire and special perils policy covers risks of fire, lightning, explosion, aircraft damage, riot, strike, terrorism, storm, cyclone, flood, land slide, etc. The insurance premium will depend on the type of construction of the building and safety control measures installed inside it. In addition to a fire policy, it is advisable to take a householder?s policy for the contents in the house ? furniture, electrical equipment ? and personal belongings ? jewellery and clothes, etc. If the property is constructed with a bank loan, it is advisable to take life insurance equivalent to the loan amount in the name of the borrower.

How does a health insurance company calculate deductibles in policies?

? Neeraj Bhat

Deductibles are the amount of medical expenses that are paid out of the insured?s pocket before any payment is made by the company under a claim. Deductibles are preferred by the companies to deter a large number of trivial/small claims, which are cumbersome to administer. Deductibles are a risk-management tool for the insurers and are decided keeping in mind the frequency of claims, amounts of claims and administrative expenses incurred in managing small claims.

Deductibles put more cost burden on customers. But they result in reduced premium. The higher the deductibles, the lower will be the premium. In a top-up health insurance policy, the deductibles are best decided by the customer depending on his risk-taking capacity.

How would I know the charges being levied on Ulips?

? Ajay Singh

Ulip policies are transparent in terms of charges levied. Irda has mandated that all Ulip policies should have benefit illustrations along with details of charges under two scenarios, i.e, 6% and 10% returns. The charges under Ulips are premium allocation charge, which includes commission, mortality charge, policy administration charge, funds management charge, service tax etc.

Further, Ulips may have riders charge, switching charge, surrender charge and top-up charge also. Irda has capped overall charges at 3% of the net yield in case of Ulips with tenure of 10 years or below and fund management charge will not exceed 1.5%. Net yield is the return that customer gets on maturity minus charges.

In case of insurance policies of above 10 years, Irda has capped total charges at 2.25%, of which the fund management charges willnot exceed 1.25%.

The author is chief financial planner with Max Secure Financial Planners

Send your queries at fepersonalfinance@expressindia.com

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First published on: 25-12-2012 at 02:48 IST
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