|
| Unemployment insurance |
| Tinesh Bhasin / Mumbai Apr 19, 2009, 00:06 IST |
|
In its present format, this policy doesn’t inspire much. Create a contingency fund instead
An insurance cover for job loss does grab attention in current times. Layoffs have become part of companies' cost cutting exercise in the economic slowdown. And such a policy will make one feel more comfortable, especially if one is saddled with loans.
To tackle this uncertainty, ICICI Lombard has recently come with a policy in which payment of equated monthly instalments in the event of a layoff is present as a compulsory rider. Called Secure Mind, this is a benefit policy, which means that the entire insured amount is paid, if the insurer accepts the claim.
The policy is primarily meant for covering critical illnesses such as cancer, end stage renal failure, multiple sclerosis, stroke, paralysis and so on. But a closer look at the brochure reveals that within these diseases too there are stringent guidelines. For instance, the company will settle a paralysis claim only if there is a "complete and permanent loss of function of two or more limbs".
Job loss is an additional feature loaded to this policy that covers three equated monthly instalments for any one loan. But it is not as simple as it sounds. Here too there are pre-conditions that need to be dealt with. The job loss has to occur due to retrenchment, layoffs or for health reasons. For instance, job loss arising due to a company closing a division due on account of poor financial health or an action of public authority leads to a firm's closure.
However, this policy does not cover job loss if the employer asks the employee to resign or ask to leave on account of poor performance. This is because the insurer considers such events as controllable and insurance is supposed to cover only unforeseeable risk.
The policy covers persons between the age of 20 and 45 only. The premium and sum insured depends on number of parameters. These include the loan amount, loan duration, policy tenure and age of the insured. The premium increases with the increase in any of the parameter.
The sum insured is determined on the basis of the outstanding loan. Say, a 35-year old has an outstanding loan of Rs 30 lakh, the sum insured will be Rs 30 lakh. The premium for a 5-year policy will be Rs 68,500.
"We cover the person for the entire loan tenure but the maximum policy given out is five years. The insured will need to renew it thereafter," said Sanjay Dutta, head of health insurance at ICICI Lombard.
The company has sold 1.3 lakh policies in the past financial year and 25,000 alone in the last quarter
(January-March). Most of the policy was sold by lenders along with their loans. Individual policies purchased were around 50,000.
Though ICICI Lombard does not have any competition in this segment, but Bajaj Allianz had experimented with a similar cover last year. However, it discontinued the policy as the business was not attractive, said an insurance broker.
The main problem for buyers of this policy will be establishing the fact that they have been retrenched and, not because of lack of performance.
With companies beginning make the entire evaluation process much more stringent, quite a few employees have found themselves unemployed. In such cases, Secure Mind does not give you any cover.
In the West, where this product originally comes from, insurers provide this cover as part of employer liability. This is mainly to insure the employees against job loss due to merger and acquisition. "Even in India, this product makes more sense when a lender sells it with a loan," said the broker.
Market experts are of the opinion that this saving the premium in an emergency fund will be much better. "It makes more sense to invest the premium in a contingency fund," said Rahul Aggarwal, CEO Optima Insurance Brokers.
In other words, if you are looking for a critical illness policy, this products works just fine as it would pay the entire amount if you fall ill. But if projected as a policy that protects you during a job loss, it does not make sense.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
Content Guide
