A Comprehensive Guide for you to Choose the right Insurance Company for your need:
Insurance, whenever you listen this word, what comes in your mind, at first? Accidents,expensive hospitals,right?But have you ever thoughtwhy is it like this?After listening the word Insurancewhy do we get scared?Why is it like this whenever someone comes to talk about insurancethen we run away from that person?Well, let me tell you!There is only one reason behind it.And that reason is, Mendacity!Means that misinformation,the and result is, according to an economic survey by finance ministrytoday only 3 out of 100, have their life insurance policy!And due to this,a common person of our countrywho really needs the insurance moneyhe isn’t able to get that money!And here, this is not the fault of insurance companiesrather it’s the fault of common people like us because we don’t understand insurance as a business.
How does an insurance company work?How do they make money?And like you buy insurance to reduce the riskthen what do these insurance companies do to reduce their risk?Where do we make mistakes while buying insurance?And how you, apart from the maximum peoplecan buy the best insurance for you?Will understand all these things in detail!
Origin Of Insurance
See, INSURANCE isn’t a new word! Rather, it was started 5000 years ago from today in 3000BCs.It was the time, when Chinese businessmen, in order to reduce their business risk made a strategy! What they did in that strategy they made a group of all the businessmen and those businessmen created a huge fund by contributing small amounts. If anyone of them faces loss then that fund is used to cover that loss. And this is how, every businessman gets safety in his business. But with time, as this strategy started getting popularity then the businessmen of other countries started using this strategy in their businesses. After all the businessmen made amendments accordingly.
But the modern insurance culture you see these days that actually started in 1666,when a huge place in London got fire,that is also called the ‘Great fire of London’.When this incident takes placethen an English economist, Nicholas Barbonstarts insurance business of a buildingthat is also called the first fire insurance company of London!After some time, in year 1732 in South Carolina state of America,one more insurance company was built in the same way.But this is about foreign countries.What about India?Then see.In year 1818 first insurance gets established in Indiawhich was named Oriental Life Insurance Company,that was started in Kolkata.And it work for some years.But then in 19th centurymultiple insurance companies start getting established.1912 it was the yearwhen, in order to regulate the Life Insurance BusinessIndian Life Insurance Company Act is passed!
It was happening for the first time in India when, in order to regulate the insurance sector a statutory entity was formed.But despite doing all this despite introducing so many regulations unfair trade practices were increasing in the market.That’s why in the year 1956 the government of our country decides to nationalize this industry!After which, on 1st September 1956Indian government combines 245 Indian and foreign life insurance companiesand makes one company!And the name of this company was Life Insurance Corporation,which you know as LIC today!And by mid-1990swhether it is life insurance or general insurance all of them was controlled by the government.
But in the year 1993 Mr R.N. Malhotra, the former governor of RBI a committee was established named Malhotra Committee.The job of this committee was to tell the government that what amendments can be made in insurance sectorthat will benefit people.Next year, when this committee submits its first reportit was told in that report that it’s time to include the private players in India’s insurance sector.After which, in the year 1999 on the basis of recommendations of Malhotra CommitteeInsurance Regulatory And Development Authority of India, i.e. IRDAI was established.
Why was this body established?What is its importance?And common people like you and mehow can we use this body for our benefit,you’ll get to know all these things further.According to IRDAI till September 202224 life insurance companiesand 31 non-life insurance companies used to operate in India.And today these companies sell different type of insurance policies!But the main operating principle of themis exactly same,that is to minimize their risk!But now the question ishow do these companies do this?And the money these companies get how and where do they invest this money?So see in order to understand this first of all let’s understand how does the insurance business work?
let’s understand how does the insurance business work?
Let’s take a simple exam of life insurance.Suppose there is a person named Ramesh who wants to get life insurance.Because suppose if he diesso that his wife and his kids don’t get financial troubleand they can survive.Now to reduce the risk of this death uncertainty of Ramesh.Ramesh goes to insurance company named Adi Bhai Life Insurance and says, ‘I want life insurance worth 1 crore’and for that I’ll have to give 700 rupees premium per month!But why does Ramesh has to give this money? So the policy that Ramesh has taken,it’s kind of a contract,that is signed between two parties.In which the first party is Ramesh,that is policy holder and second party is insurance company,that is giving policy!It is written in the contractthat if Ramesh dies in future before a certain age,then Adi Bhai Life Insurance from where he has taken insurance will give 1 crore rupees to Ramesh’s family so secure his family financially!And in this contract, Ramesh has promised until the policy gets expired or he die she will keep giving 700 rupees to the insurance companyas a premium!
Now the insurance premium which the company collectsis the only revenue source of the revenue company!Now here, the whole game is of volume.The way, Ramesh bought the policyin the same way, Adi Bhai Corporation will sell this policy to 10 lakh more people. And nothing will happen!It will collect 70 crores monthly or 840 crores rupees yearly from these 10 lakh people!And the premium this company getsis the only source of this company!But the money that gets collected in one yearthe company puts some of the money in the liquid assets and put rest money in illiquid assets.
So that if someone has to get his claim passedthen they should have money to pass those claim!But this is about earning.Now let’s understandthe money that these insurance companies makewhere do they spend this money?So look,whatever the money these insurance companies makegets spent on three things.In which the first expenditure is Operational Cost.A major part of company’s revenueis spent on employees’ salaryoffices expensesand the commission of the salesmen!Then the second expenditure is insurance claim!Suppose Adi Bhai Corporationfrom where 10 lakh people have bought the policy100 of them die!And all of them had bought policy of 1 crore each!Now they have to give 1 crore to each family!Now the company will have to give 100 crore rupees to the familiesas a claim!And after all of this,the third expenditure is Reinsurance of the company!Like a normal person buys insurancefrom an insurance company to reduce is risksimilarly, insurance company, in order to minimize its riskgets an insurance,which is called Reinsurance.
Suppose Adi Bhai Corporation sold 10 lakh policies in one year by thinking that 500 people will come to get the insurance claim,but suppose, 5000 people die because of some reasons then how much money will the company have to give?5000 crores.But the earning of the company is just 840 crores.Then how will this company give the money?The company will get bankrupt like this!That’s why, in order to minimize this risk these companies buy insurance which is called Reinsurance. And in our country General Reinsurance Corporation is the biggest reinsurance company and today, almost every company gets reinsurance from this company!This is about the risk of life,f or which we buy life insurance. But in India, the total insurance market General Insurance has 25% of this market. Whether it is life insurance or general insurance the business model of both type of companiesthat is same.But their work-flow is very different from each other.And if you understand this,t hen you’ll exactly know that how to select the best insurance policy for ourselves.Now whenever Insurance will be talked about first of all, these two categories will come, in which the first one is life insurance and second one is general insurance. First of all, let’s talk about life insurance.Because that is most important.
There are 7 type of life insurance:
Now see, all the insurance companies in park, sell these 7 type of life insurance. In which the first one is term insurance. Term insurance is the most basic type of insurance ,in which the policyholder is given life insurance policy for a pre-determined time. In which the time maybe 1 year, 5 years, 10 years ,40 years it can be any number of years. But there is only one catch here one should buy the term insurance as early as possible. The sooner you buy term insurance the lesser premium you have to pay! And suppose, you are at that stage of life where you don’t have any dependents, you don’t have wife or kids, still you should buy the term insurance at the earliest. So that you can get it at the cheapest prices. Let me explain this with an example.If you go to buy the term insurance worth 1 crore from Max Insurance then it will cost just 700 rupees per month! And if you buy the same worth 2 crores then it will cost 1046 rupees per month as premium!But if you buy after some years then this amount of the premium will increase.
Now there is one more thing here.That whenever you are buying term insurance then the thing you have to care the most about that the company you are buying term insurance from is the claim settlement ratio of that company is good?Claim settlement ratio basically, it is a ratio which tells you that how many claims did the company get and how many claims did the company pass!And you as a consumer,in order to check this ratio of every company you can check the report of IRDAI.That data is clearly mentioned there.Like, the report of 2022-2023 according to thatt he claim settlement ratio of Max Insurance is the highest.
99.51%Whenever people buy term insurance they commit one more mistakethat mistake isthat they don’t take additional riders with the term insurance.But you must take these rider These riders include a lot of things,like accidental cover,permanent disability rider,critical illness protection!You should take these ridersthat for suppose, you don’t die,but any of them happens with you!So you won’t be able to work!And your family will face the financial trouble!So in such cases,these riders provide your family this protection!I know this is very uncomfortable matterand I don’t want anyone of you to face such things,but always rememberthat the trouble doesn’t warn before coming.So it is very importantto secure your family in such cases.
Usually, those who have income only they can buy term insurance. But the most special thing about Max Life Insurance is that the housewives, who want term insurance for themselves, can get it for themselves without showing the income proof of their husband! And even if you are self-employed or you have any business, still you can buy term insurance from here. Rest, if you want to check for yourself, that what will be the cost of 1 crore term insurance for me? Then I will drop a link in the description and comment box, you can go there and check that how much it will cost you!
Now let’s come to the second type of life insurance policy, which is Whole Life Policy! Basically, it is like term insurance but the term insurance is limited to a particular term, but whole life term insurance will give cover for whole life. Then comes this third type of policy, which is called Endowment plan! This policy is insurance cum investment plan where some part of your premium goes into insurance and some part of them goes into investment. Now if the policyholder gets sick then the amount which was insured the person gets that amount. But suppose that person stays survives then he gets the maturity amount of his investment along-with the accrued bonuses. But yes, the plans of endowment policy are expensive then the term insurance. Because in the endowment policy, a big share goes into your investment, and a small portion goes into insurance.
Now let’s come to the fourth type of insurance, which is money-back policy!This is kind of an endowment policy but during the policy term, the policy holder keeps getting on pre-defined intervals. And suppose, the policyholder dies then his nominee gets the insurance amount. Then comes this fifth type, which is unit linked insurance plans, ULIP! This is also like Endowment policy because along-with life insurance coverage, you get a chance of investing in market related instruments. And again, the premium here is more expensive than term insurance plan. Because a very small part of premium is used to cover your life and the rest big portion is used for investments in the market. And the money of the investments done your family gets that money only when the policy gets matured. And suppose, before that, if something happens to you then your family will get the money of life insurance cover but they won’t get the money invested in the market.
Then comes this sixth type, which is pension plan! It is also called retirement plan! Here, whatever money you’re making some of that money goes as premium, and at the time of retirement, you will be given that money after some years. Then comes this last type of plan, that are child plans. This policy is made for those parents, who are the solo earners and they don’t have much savings .If such parents buy their insurance then suppose, they die then that particular insurance company will cover the living and education expenses of the kids. Now, these were life insurance plans, now let’s understand the second category which is general insurance what happens there. See, in the general insurance the biggest sector is health insurance.
Now understand, the health insurance there, the insurance company will pay for the serious disease or for any reason you get hospitalized for!But it is also of seven types. In which the first one is Individual Health Insurance. This policy covers a particular individual. That can be you, your wife and your kids also. In this type of policy you can claim for medical expenses like any type of illness, or suppose you get hospitalized, surgery, room rent, day care!Then the second type is family floater. Here, a single sum is insured, in which all the family members are covered! This plan is beneficial because the premium you have to pay is comparatively less than the individual insurance. And here, your whole family gets assured for a particular sum! Then comes this third type that is Group Health Insurance. Basically, this is for corporates where an insurance is bought for the whole group.
Then comes Senior Citizen Health Insurance! Suppose you are 60+ years old,then still you can buy health insurance.In such cases, the whole cost of medication your hospitalization expenses, the insurance company will cover all these expenses.Then comes Maternity Health Insurance,which is basically a rider which you can club with basic health insurance! Where, suppose a couple is planning a baby then all the pregnancy related expenses of the woman all of their hospitalization expenses will be covered by the insurance company! But here are some terms and conditions, that if you are buying,t hen must read them!The next one is very important, that are critical insurance policy!
These days, the lifestyle of most of us has gotten ruined. Due to which the chances of lifestyle related diseases have increased a lot. Now this policy is specially designed that all the lifestyle diseases you can have are covered by the company! Like cancer, stroke, kidney failure, paralysis coronary artery bypass surgery, first heart attack, pulmonary arterial hypertension, covers all such things. All these lifestyle related diseases their treatment expenses are very high! So, you must have this policy! And then comes Top-up health insurance. This plan is to cover your expensive treatment.
But all of these plans have a deductible clause, like for an example, you get admitted in the hospital and the bill amount is 10 lakh rupees, but the policy you have bought has top-up of 15 lakh rupees, in which 3 lakh rupees are deductible. So here, you will have to pay 3 lakhs from your pocket but the rest 7 lakh rupees will be covered by the company! Now suppose, the bill would have costed 12 lakhs, then the company will cover rest 9 lakh rupees. Now after health insurance, the second biggest sector in general insurance is motor insurance. It insures your bike, car or the truck you have! That if they meet accident in future or anything happens then the company will pay for that, you won’t have to pay the money! After health and motor insurance the rest market share in general insurance included travel insurance, pet insurance, property insurance and other multiple type of insurances.
But the most important thing, that while buying insurance policy how will you come to know that the insurance policy you’re buying is right or not for you! You need it or not. And if one has to buy a plan then which plan to buy! To understand these things, first of all, you have to understand that whenever people buy insurance what mistakes do they commit? First of all, let’s talk about health insurance. Whenever someone buys health insurance then there are three doubts in his mind. First doubt is, I don’t need health insurance. I am healthy! You’re very health conscious go to gym also, have fit body also, take healthy diet also, but still you can get any disease or meet any accident, where you can have to pay a very high amount. So there, the health insurance policy will keep you saved.
That the second thing that comes in mind, that only the earning member in the family needs insurance. The earner needs insurance, others don’t need insurance. There are many people don’t consider health insurance a serious thing. They think that the person who is earning money in our house, only he needs health insurance. But if you think logically then anyone can fall sick or meet an accident. Then suppose, dad has taken health insurance or the daughter meets an accident then dad’s insurance won’t help his daughter. And then third thing people think that is ‘Only healthy people can buy health insurance’. There are many people who don’t take health insurance because they think that we already have disease, so who will give us health insurance? We won’t get it. But you’re wrong.
finding the right insurance company!
These days, there are many such companies that give you insurance despite having pre-existing diseases. But their conditions and clauses are different there. Here, let’s understand that how can you choose best insurance for you? And I’m seriously saying this. This is not as difficult as you think! You just have to follow these 3 steps and it will get done.
First step is, finding the right insurance company! First of all any company you’re checking compares its range of plans. And look for the USP in their range of plans. Because many a times, the company that has higher range of plans you get such plan there that matches your requirements. The company that has diverse range of plans you can easily choose plans there. Then the second thing you have to check is, network of hospitals. This is extremely important because it helps you avail cashless claims. Otherwise if you buy insurance policy from such a company that has small network of hospitals, then the agent of the company will come first then he will check first, and then you’ll get money in the account. But until your claim gets passed all the money being spent in your treatment, till then you will have to pay all the money yourself! Later, the insurance company will give you refund.
Then the third factor you have to check is, claim settlement ratio! I’ve already told you about this! That the higher it is, the better it is.Then comes this fourth thing, that is claim based loading. Suppose a policyholder is a risky individual means that he has diseases then some of the companies give him policy but charge high premium from them!So here your money can get wasted,so take care of that. And then the fifth important factor comes, that is ‘read reviews’. Any company you’re planning to buy insurance from must check its reviews and testimonials.Because this is where the reality of the company is hidden!There, you’ll come to know that how much this company has helped its customers.After doing all these things,you have to follow this .
Second step which is finding the right plan that suits your requirement.How to find the right planfor that, you have to consider these three major factors.First is, Coverage benefit.How much benefit you’re getting!How to choose that?First of all, assess your coverage needs.That for an example, anything happens to me in futuret hen how much money can I need or how much cover will I need? As soon as it gets finalize dafter that, look for such plans that give you additional benefits also. Because your scope of coverage increases.Like for example, sum insured restoration! High no claim bonus.Value added benefits.Annual health checkups. These features are some of the additional benefits. Always check them!And after doing this explore this second factor, that is premium amount. That how much amount you have to pay! Here you can compares same plans with same additional benefits that which company is charging less premium! And where you’re getting the same benefits.
Then third and most important factor,that is waiting period. Waiting period is the time of waiting for the coverage. Like, suppose you got admitted in the hospital and you informed the insurance company to get the insurance so here, the company will take a certain period of timeto give you that claim!That is called waiting period. Here, you always choose such plans which has the shortest waiting period. So that you don’t have to bear high financial load.This was about, how you can choose the best insurance policy for yourself. But there is one more thing without which, all these things are useless. And that is ‘reading policy documents carefully’.
Conclusion
By reading the policy documents you get awarded of yourself and your insurance company! That on what basis, the company has given me insurance. Because if you don’t know them then maybe, when you need that insurance then your claim may get rejected. Like, let me give you an example. Suppose, you took a life insurance policy in which you were asked, do you smoke or not? And suppose, you didn’t smoke at that time. But after 4 years of buying the policy you started smoking. And when you did this ,then you didn’t inform life insurance company about that! You know what will happen then? Suppose you die in a car accident,it is not related to the smoking. But the insurance company won’t pass your claim here!
Why? Because you’ve violated the terms and conditions of the company! Because every company writes the terms and conditions in every policy! But the problem is that we don’t read them seriously! So, you don’t do that mistake. If you want to buy life insurance for yourself and you want to know, that how much the 1 crore or 2 crore term plan will cost me? Then I’ve put one link in the description and comment box for you,you can easily check that how much it will cost me.
Reputable Insurance companies in India
- Life Insurance Corporation of India (LIC): LIC is one of the largest and most well-known insurance companies in India. You can visit their official website for more information: LIC India.
- ICICI Prudential Life Insurance: ICICI Prudential is a leading private sector life insurance company in India. You can find more information on their website: ICICI Prudential.
- HDFC Life Insurance: HDFC Life is another prominent private sector life insurance provider in India. You can visit their official website here: HDFC Life.
- Bajaj Allianz General Insurance: Bajaj Allianz offers a range of general insurance products. You can find more details on their website: Bajaj Allianz.
- New India Assurance Company: This is a government-owned general insurance company. You can learn more about their services on their official website: New India Assurance.
- Oriental Insurance Company: Another government-owned insurance company offering general insurance products. You can visit their website for more information: Oriental Insurance.
Please note that insurance offerings and policies can change over time, so it’s essential to visit the official websites of these companies or contact them directly to get the most up-to-date information on their services and products. Additionally, you may want to consult with a financial advisor or insurance expert to help you make informed decisions about your insurance needs.