FLAME Newsletter - October 17, 2012


QUOTE OF THE WEEK:

There are high spots in all of our lives and most of them have come about through encouragement from someone else.

In our everyday race of life, we tend to overlook a lot of important aspects such finances or family. We often complain that our everyday routine does not give us time for anything else. As a result, a lot of our priorities become our options. However, we need to understand that life has its own plans. In case of an unfortunate incident with us, our loved ones my end up suffering. To safeguard their future, we need to secure ourselves.

However, with our busy schedules we may not be prompt with our insurance policies and may keep delaying taking one until it is too late. There is a solution for that too. Group policies are given by a firm, company, associations, etc. to their employees. Moreover, the group policy is eligible for group discount based on the size of the group. In this way, you can even save money on making the investment!

YOUR FINANCE DEMYSTIFIED:


Group Personal Accident Insurance Policy

The key benefit of GPA insurance policy is that it provides compensation in the event of death or disability of an insured employee directly due to accident.

Mr Ajay Gupta—a middle-income working employee—was careless about his finances. He was working in a well-reputed organisation for more than five years. Apart from his daily expenses, he also had to meet the financial requirements of his family. Being tied-up with work, Mr Gupta never knew what benefits his employer / company was offering to the employees. He only knew that a certain amount of his income was deducted for group personal accident (GPA) insurance. He never bothered to know what GPA is and what benefits it offers.

Unfortunately, Mr Gupta met with an accident and lost his hand. Mr Gupta had to stay at home for some days for medical treatment. He wouldn’t join his company immediately. During his stay at home, Mr Gupta used all his savings to meet his daily expenses and medical treatment charges. After two months, Mr Gupta recovered fully and joined his company back. At the work place, he discussed about his ‘loss of income’ due to his permanent disablement and wished he had an insurance cover.

Mr Gupta already had a permanent total disablement cover—under GPA—offered by his company. But he never enquired about it. Under GPA insurance, Mr Gupta was eligible to get permanent total disablement benefit. But due to his ignorance, he had to use his personal savings. Most of us behave like Mr Gupta. We are hardly aware of the benefits our company / employer provides us under different schemes—one such scheme is group personal accident insurance policy. Let’s try to know more about GPA policy to avoid ourselves from being in a situation which Mr Gupta had to go through.

The key benefit of GPA insurance policy is that it provides compensation in the event of death or disability of an insured employee directly due to accident. This policy is basically designed to offer some sort of compensation to the insured person who suffers bodily injury solely as a result of an accident which is external, violent and visible. Hence death or injury due to any illness or disease is not covered by the policy.

The policy operates worldwide and is a 24 hours cover. Different covers are available ranging from a restricted cover of death only; to a comprehensive cover covering death, permanent disablements and temporary total disablements. GPA insurance covers accidental death, loss of limbs, permanent total and partial disablement as selected and granted by the insurance companies based on the underwriting norms. The major exclusions under GPA includes pre-existing conditions, natural death, suicide, illegal act, dangerous sports, pregnancy or anything related to childbirth.

Group policies are given by firm, company, associations, etc, to their employees. The group policy is eligible for group discount based on the size of the group. The group discount is slab-wise and increases with the size of the group. The following is a specimen table of benefits on the basic of sum insured of Rs. 1 lakh which sum insured is selected for the purpose of illustration.

Know what group personal accident covers

Sr. no.

Contingency

Amount of compensation payable

A.

Death

Rs. 1 lakh (100% of capital sum insured)

B.

Loss of 2 limbs, both eyes or 1 limb & 1 eye

Rs. 1 lakh (100% of capital sum insured)

C.

Loss of 1 limb or 1 eye

Rs. 50,000 (50% of capital sum insured)

D.

Permanent total disablement other than the above (e.g. Paralysis due to an accident)

100% of capital sum insured

E.

Permanent partial disablement (e.g. loss of a finger)

% as shown in the table in the policy

F.

Temporary total disablement

Weekly payment of Rs. 1,000 (1% of capital SI) subject to maximum 100 weeks.

The benefits (A.), (B.), (C.), (D.) & (E.) above are referred to as capital benefits and benefit (F.) as weekly benefit. Remember, it is not necessary that all benefits mentioned above are to be covered. On underwriting consideration or at the request of the insured, policies may be issued covering all benefits or benefits (A.) to (C.) or (A.) to (E.) or only benefit (A.). Employees need to refer to the policy wordings for the complete cover, exclusions and terms and conditions of the policy.

Some policies may cover additional benefits like expenses for ambulance charges, loss of employment; expenses for carriage of dead body of insured (death due to accident only) to place of residence—subject to limits. In case death or permanent total disablement (PTD) of the insured person, the policy provides for education fund for dependent child in addition to capital sum insured.

Documents required for settlement of claims (accidental death)

  • Duly signed claim form
  • Death certificate
  • FIR (final police report)
  • Post mortem report
  • Affidavit from the legal heirs of the deceased (in case nomination has not been filed by deceased)
  • Copy of certificate of insurance signed & attested by authorised official

Documents required for settlement of claims (PTD)

  • Duly signed claim form
  • Medical certificate
  • Leave of absence certificate from employer
  • Copy of original certificate of insurance signed & attested by authorised official
  • In case of accidental death, the sum insured is provided to the nominee as mentioned in the policy document, whereas in PTD sum insured is paid to the person insured.


Group Term Insurance Plan

Group term plan provides the employees of a company / firm with a life insurance plan so that their families’ needs are looked after in case an employee dies in an unfortunate event

There is a well known saying ‘People make the place’. No matter which industry you are in, the value that employees bring to an organisation cannot be underestimated. The employees—who work in a company / firm—have a family that financially depends on them. Hence, each employee requires some type of life insurance, especially when others depend on them financially. Providing basic financial security for these employees would not go unnoticed.

The group term insurance plan meets this need and serves as an ideal way for companies to reinforce their bond with their employees. Sum assured is payable on death (either due to natural causes or accidents). Several multinational corporations, large Indian companies, foreign banks and software companies have already covered their employees under group term insurance.

Group term plan provides the employees of a company / firm with a life insurance plan so that their families’ needs are looked after in case an employee dies in an unfortunate event. This sort of insurance would definitely encourage employees to be a part of the company for a long period. Group term plan covers an employee from the minimum age of 18 till the maximum age of 70 or normal retirement age of the employee, whichever is earlier.

Group term insurance plan insures a company’s employees against unfortunate incidents like death, disability or disease. It covers any kind of death—whether accidental or natural—with global coverage .i.e. even if a mishap (death) occurs outside India, it will be covered under this policy.

Group term insurance is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is low. Under this plan, life insurance cover is allowed to all employees of a company / firm subject to some simple insurability conditions without insisting upon any medical test / report.

All new employees become a part of the group, if they meet the eligibility criteria. The cover starts from the date of joining the company. The particulars of the new joinees are to be submitted by the employer—to the insurance company—on a monthly basis with the proportionate premium. The plan provides a certain amount of sum assured (as decided by the company / firm) only on death and there is no maturity value paid to an insured employee if he survives the term of the policy. The benefits under the policy are paid to the nominee on occurrence of the event.

In case of an individual leaving service or the company, life cover will cease immediately. Generally, the proportionate premium will be refunded for the employees leaving the scheme. The cover will cease on the earliest of: Date of withdrawal from employer's service; normal retirement date or an earlier age specified for the group by the employer and date of discontinuance of the policy.

  • Group term insurance
  • Provides protection to an employee
  • Relatively low cost
  • No medical test
  • Choice of optional riders

Group term plan is a one-year contract that is renewable each year. Every year on annual renewal date the insurance company charges the premium depending upon the changes in size and age distribution of the age group. The premium under such scheme may be wholly paid by the employer. However, the scheme may be contributory i.e. the members may also contribute.

Premiums are payable annually in advance. There is a grace period of 30 days on annual renewal date. Claim arising in grace period will be considered, provided the policy is renewed. When a claim arises, the particulars of the respective member are to be intimated together with the claim form and death certificate.

Usually an employee should not have remained absent or availed of leave of absence on grounds of health for a continuous period of seven days or more in the year preceding his admission into the plan. All claim payments are considered as non-taxable receipts and can consequently be considered as tax exempt under Section 10 (10D) of the Income Tax Act, 1961.

  • Optional rider benefits
  • Accidental death benefit
  • Total permanent disability
  • Total permanent & partial disability benefit
  • Critical illness benefit
  • Terminal illness benefit

Group term insurance may have add-ons like double accident benefit, critical illness benefit, disability benefit, etc. The plan also offers additional covers against accident and disabilities as riders to the basic plan for a nominal additional premium. Accident and disability benefit rider generally means on death of the insured employee due to an accident, the sum assured under the rider will be paid. Under accident benefit rider, an amount equal to sum assured under the rider is payable in the event of death of the life assured due to accident. Double accident benefit, i.e. payment of double the sum assured on death due to accident (without permanent disability benefit), may be allowed under group insurance schemes for an extra premium.

Also read…

Employees’ State Insurance… For lower income groups

DID YOU KNOW?

Considered as one bizarre insurance claim, a man said that a zebra crashed with his car while he was at a Safari Park. The insurance company was aware of the aspect that the primal instinct of any animals, they will avoid or stay away from a vehicle which is loaded with passengers on a safari tour.

IN THE NEWS THIS WEEK:

Coming as a sigh of relief to the country, India’s Index of Industrial Production for August beat expectations to come in at 2.7%. However, the government revised lower the IIP growth rate for July to (-)0.2% from the provisional estimate of 0.1%.

India's industrial output grows by 2.7% in Aug. 2012

News from the inflation front continues to be bleak, as the Wholesale Price Index for September stood at 7.81% as against the consensus estimate of 7.7%. It was at 7.55% for the previous month. It is now unsure if the Reserve Bank of India will oblige markets with an interest rate cut on Oct 30 as inflation remains sticky and growth has shown slight improvement.

Inflation rises in September on higher fuel prices

TERM OF THE WEEK

Adjustable Peg

A system that permits changes to be made in the par rate of foreign exchange after a country has had long-run disequilibrium in its balance of payments.

ABOUT FLAME

FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India's spectacular growth story.

In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation's economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL's FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.

Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity.

This portal is but one of the various IIFL initiatives that would be part of FLAME.



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