Insurance premiums are rising sharply every year, incurring additional costs for vehicle owners. The reason for the very high rate of increase in auto insurance premium is because the auto insurance claim is increasing every year. The high number of vehicles on the road without insurance is also a factor contributing to the increase in premiums.

It is estimated that two-thirds of two-wheelers in India run on the road without insurance. Two-wheelers leave showrooms with compulsory insurance. But by the second year, most vehicles no longer have insurance coverage.

This is because many car owners forget or deliberately refuse to renew their insurance. If all vehicles have insurance, the premium is likely to go down. Increasing premium income will help reduce the loss of claims insurance companies.

For example, suppose that out of 10,000 vehicles on the road, 50 vehicles are involved in accidents and the loss due to this is Rs.50,000. If all the vehicles are insured, the average risk premium per vehicle can be assumed to be Rs. 50,000/10,000 = Rs.5. On the other hand, if only 5,000 vehicles are insured, the risk premium will increase to Rs. 50,000/5,000= Rs.10 It is clear from this example that the number of insured vehicles must increase in order for the premium to decrease.

As the number of violators of compulsory auto insurance renewals increases, the government needs to take strong measures to prevent violations. However, apart from roadside inspections by the police, the authorities are not taking any other significant steps to trace the owners of uninsured vehicles.

If the necessary steps are taken in this regard, the law abiding vehicle owners will benefit from it. Measures such as showing a copy of the insurance requirement to refuel at petrol pumps can be very effective.

The post How to bring down auto insurance premium appeared first on The Gulf Indians.

There is a common misconception that smokers would not get coverage under health insurance. Contrary to this misconception, many health insurance companies offer policies for smokers. But smokers may have to pay a higher premium to get policy coverage. Premiums are higher because smokers are more likely to develop lifestyle diseases than non-smokers.

Insurance companies classify a person who uses tobacco in any way as a ‘smoker’. Insurance companies conduct a medical examination to determine the extent of tobacco use and, based on this, determine the premium for coverage. Parts of tobacco can be found in blood, saliva, urine or hair. The duration of exposure to tobacco in the body depends on how long a person smokes, age and general health.

When filling out an application for a health insurance policy, you will need to answer questions such as “Do you smoke?”, “Have you smoked for six months?” If the answer is yes, the number of cigarettes smoked and the details of any health problems caused by smoking should be disclosed. You must also undergo a medical examination as requested by the insurance company.

Premium is determined by factors such as age and coverage amount. Disclosures by future smokers can be avoided by disclosing it and undergoing a medical examination. If the number of cigarettes smoked after taking out the policy increases or the health condition worsens due to smoking, the insurance company should be informed.

The insurance company decides whether to grant the policy based on the health condition. If lifestyle diseases such as diabetes and high blood pressure are present, the premium may go up. The policy may be denied if the smoker has Type 2 diabetes.

If there are currently no other diseases, those who smoke only a few cigarettes a day will have no difficulty in getting the policy. At the same time, it will not be easy to get a policy for someone who smokes more than 20 cigarettes a day.

The same plan goes for smokers and non-smokers; only that there will be a difference in the premium. Those who smoke more than 10 cigarettes a day are likely to have higher premiums. If you quit smoking in the future, you can get a discount on the premium. This consideration is given only after at least two years of stopping to smoke. At the same time, some insurance companies do not charge extra premiums for those who have no health problems and only smoke moderately.

Smokers should not avoid a health insurance because the premium is high. Coverage should definitely be ensured as smokers are at higher risk of developing lifestyle diseases.

The post Health insurance is available for smokers as well appeared first on The Gulf Indians.

People in India have misunderstood life insurance as an investment. This is why policies like endowment plans and money back plans are widely sold. Life insurance companies also take advantage of this misconception and nurture sales fattening. Will stricter tax regulations help curb this trend?

Unlike long-term investment schemes like PPF, EPF and NPS, life insurance policies, especially those with investment, do not get full tax relief. Conditions for paying tax on income at the end of the investment term of the policies have been tightened.

194 DA in the Income Tax Act has been amended. As per the amendment introduced in the last financial year, five per cent TDS will be applicable if the net income earned at the end of the life insurance policy is taxable. Net income is calculated by deducting the premium paid up to that point from the amount received from the insurance company. The bonus will also be treated as net income.

At the same time, TDS is not applicable if the total amount received from the insurance company is less than Rs.1 lakh. TDS is not applicable if the Minimum Sum Assured is transferred to the nominee after the death of the policy holder. Therefore, TDS is not applicable for claims on term policies.

If the annual premium is more than 10% of the sum assured, income tax is applicable. For example, if the annual premium of a policy with an insurance premium of Rs.2 lakh is above Rs.20,000, income will be taxable.

In case of life insurance policies issued before April 1, 2012, tax deduction will not be available if the sum insured is less than five times the premium. That is, the policyholder is liable to pay the tax as per his tax slab, including the income received at the end of the policy term.

As per the rules enacted in 2012-13, not all life insurance policies are tax deductible under Section 80 (c) of the Income Tax Act. No tax deduction is available if the annual premium is more than 10% of the sum assured (Sum Assured). Income earned on withdrawal of investment from such policies is taxable. At the time of withdrawal, the policyholder has to pay the amount after 5% TDS directly.

The post Tax deduction is not available for all life insurance policies appeared first on The Gulf Indians.

Due to the financial difficulties of the COVID-19 period, it may not be possible for many to pay large sums of money as one-time insurance premium. Such persons have the opportunity to pay the premium of the health insurance policy every month. It is also possible to pay the premium on a quarterly, half-yearly or annual basis. Until recently, the premium for a health insurance policy could only be paid on an annual basis.

Paying premiums together during the year can be a financial burden for many. Many people do not remember that they have to find and set aside money every month for expenses such as insurance or premium paid once a year. As such, it may feel like a financial burden when paying the premium, among other expenses. Those who want to avoid this now have the opportunity to pay a monthly premium.

There is no increase in the base premium when the monthly premium is paid but there may be a slight increase in the total premium when paid on an annual basis. The insurance company is allowed to make a slight increase in the total premium when the premium is paid on quarterly, half yearly and annual basis. Depending on the type of increase plans may vary.

Existing health insurance policyholders also have the option to switch to a premium payment on a monthly, quarterly or half-yearly basis. This can be done at the time of policy renewal. A special form has to be filled up at the time of renewal of the policy.

Paying the monthly premium will also help to increase the coverage. For example, for a policy with coverage of Rs.5 lakh, the premium would be Rs.12,000 per annum. If a person who pays this together feels a financial burden, he has two options. He/she can either reduce the amount of coverage or adopt monthly premium payment method. Adequate coverage of health insurance needs to be ensured. Therefore, instead of reducing the coverage, the policy can be taken out with the required coverage if the monthly premium method is adopted.

Policyholders may have doubts as to whether coverage will be available if the claim is made less than one year after taking out the policy in the monthly premium plan. In such cases, the insurance company may ask you to pay the remaining premium.

For example, suppose the claim is filed six months after the premium is paid. The insurance company may ask you to pay the remaining six months’ premium or charge six months’ premium from the claim amount. At the same time, the IRDA rules that if any disease is diagnosed within three months of taking out the policy, it will be treated as a pre-existing disease. It also applies to those who pay monthly premium. Therefore, if a diagnosis is made within three months after taking out the policy, no claim will be allowed.

The post Health insurance premium can be paid monthly appeared first on The Gulf Indians.