What you should know about standard insurance covers

The outbreak of Covid-19 last year spurred awareness about insurance across all categories, particularly life and health plans, although choosing from amongst different policies has always been a daunting prospect.

To make things easier for the consumer, insurance regulator IRDAI introduced guidelines for ‘standard’ insurance policies whereby the coverage, cover amount, features and riders will remain the same across insurers, including the policy name — the uniformity making comparison of features easier for the policyholder.

The standard policies issued in the wake of IRDAI’s initiative include Arogya Sanjeevani (health policy), Saral Jeevan Bima (term insurance), Saral Pension (annuity product), Saral Suraksha Bhima (personal accident), Corona Kavach, and Bharat Griha Raksha (home insurance). Standard benefit policies include Corona Rakshak and Mashak Rakshak, which provide cover for vector-borne-diseases.

But despite the ‘standard’ tag, the policies may not suit all. You will still have to assess factors such as premium, personal and family needs, ease of on-boarding, medical check-up requirements and digital offerings — with variations across insurers.

Here, we seek to break down key standard insurance policies — life and health — to give you, the consumer, more clarity about what’s on offer. It could also be that, in some instances, a non-standard product may suit you better. Read on, to get the full picture.

Saral Jeevan Bima

Saral Jeevan Bima is a pure-vanilla term cover, which pays the sum assured (SA) in lump sum to the nominee in case of death of policyholder during the policy term. The nominee will receive the higher of 10 times the annualised premium, 105 per cent of all premiums paid as on date of death, or absolute SA. In the case of single premium policies, higher of either 125 per cent of all premiums paid or absolute SA is payable. As per guidelines, this policy comes with two rider options — accident benefit rider and permanent disability rider.

Unlike other term plans, Saral Jeevan Bima features a waiting period of 45 days from the date of policy commencement. But during this period, death due to accident will be covered. In case of death by reasons other than accident during the waiting period, only the premium received (excluding taxes) will be paid to the nominee.

Our take: Term insurance is one of the simplest insurance policies that can be purchased, and standard term cover is the easiest of all to buy. It offers pure risk protection with no frills attached. As a general rule, it is better to have a term cover that is 10-15 times your annual income.

Since not many insurers offer Saral Jeevan Bima beyond ₹25 lakh, this policy may suit only low-income earners. For others, a regular term plan from insurers could be better.

The advantage with existing term insurance plans is that they are competitively priced and offer wider cover. Yes, there are bells and whistles with term plans nowadays. While all features may not be needed, simple ones with built-in benefits available for no extra premium can be useful.

For instance, the yearly premium on Saral Jeevan Bima offered by ICICI Pru Life, for SA of ₹25 lakh for a 40-year term (30-year-old individual), works out to ₹12,312 (including GST) while premium on ICICI Pru Life’s iProtect Smart for the same criteria for ₹50 lakh (minimum SA) works out to ₹9,987 per year (including GST). Additionally, iProtect Smart plan comes with waiver of future premium in case of permanent disability due to accident. Thus, for a wider cover, the premium for the iProtect Smart is lower than the standard product offered by the insurer.

According to industry experts, not all individuals will be eligible for buying a term plan due to lack of income proof, and due to their job profiles. Such individuals are likely to benefit more through Saral Jeevan Bima while others can consider regular policies.

Do note, you should increase your term cover as your income increases. Your debts should also be considered while choosing SA in a term plan so that your family is not burdened with repaying them in your absence.

Saral Suraksha Bima

Standalone personal accident (PA) policies offered by almost all health and general insurers are specifically designed to cover disabilities, both permanent and temporary. The same coverages are offered as riders in term policies. A PA policy’s claim amount depends on the type of impairment, which can be permanent or temporary in nature. The standard PA cover, Saral Suraksha Bima, too works in the same fashion.

The policy pays the entire sum insured to the nominee upon the death of the policyholder due to accident, even if the death due to accident is caused up to 12 months from the date of the accident. Similarly, depending on the impairment (caused due to accident), the insurer pays the SI to the policyholder. For instance, in case of total permanent disability, 100 per cent SI is payable to the policyholder, provided it occurs within 12 months from the date of the accident.

The insurers also offer three riders under this policy — 1. temporary disablement, where 0.2 per cent of SI per week is paid to the policyholder till he/she gets back to work; 2. hospitalisation expenses payable up to 10 per cent of SI (provided it is due to accident) and 3. education grant, where 10 per cent of SI per child is payable in lump sum, provided the age of the children is not beyond 25 years.

Like other PA policies, standard PA cover also comes with a cumulative bonus where the SI shall increase 5 per cent up to 50 per cent of SI, for each claim-free year, if the policy is renewed without a break. The sum insured can be ₹2.5 lakh to ₹1 crore.

Our take: PA covers are available as rider or optional cover with term policies as well.

So, if you have opted for accidental rider or accidental disability cover in your term plan, you may skip PA cover, whether in the form of the standard Saral Suraksha Bima or standalone policies offered by insurers.

While standard PA cover and other PA covers offered by insurers are similar, you can compare them on SI limits and premium. For instance, in case of standard personal accident cover versus global personal guard cover (PA) with Bajaj Allianz General, for ₹25 lakh, the premium is ₹2,650 and ₹2,625 per year, respectively (excluding GST). Note that there is not much difference in premiums here.

Now, let’s consider accidental death benefit rider of ₹50 lakh with a term cover of ₹50 lakh. In LIC’s Tech Term, your total premium is ₹13,650 per year (excluding GST) where the term premium is ₹11,150 (₹50 lakh cover) and accidental death rider premium is ₹2,500.

When you opt for accidental death (and disability) cover as a rider/optional cover with a term policy versus a standalone PA cover, there will be premium differences. But the differences are not significant.

So, if you have a pure vanilla term plan without an accident cover as part of it and also have a base health policy, you can consider Saral Suraksha Bima itself for PA cover.

Arogya Sanjeevani

Arogya Sanjeevani covers all hospitalisation expenses as well as all day-care treatments, subject to some conditions.

The standard policy too offers cashless facility to its policyholders, provided hospitalisation is in network hospitals. It too comes with minimum waiting period of 30 days and other disease-specific waiting periods. The policy also offers cumulative bonus. (i.e increase in SI if policyholders have not made any claim in a year).

Our take: While Arogya Sanjeevani offers basic coverage, it has two key limitations.

One, it comes with sub-limits for some expenses like room rent or ICU expenses per day, beyond which insurer will not pay. Thus, even if you have, say, a ₹10-lakh cover under this policy, you may still end up paying from your pocket at the time of hospitalisation because of these sub-limits. Second, it has 5 per cent co-pay clause on all claims. This is the amount the policyholder must bear in case of a claim. Many policies in the market have no sub-limits, especially on room rent which plays an important role in your claim amount, and also come with no co-pay across all age categories.

Additionally, other features are offered in these policies, including unlimited restoration of SI, 100-200 per cent no-claim bonus, annual (free) health check-up, inflation cover, daily cash allowance, and even OPD coverage.

The case against the standard policy may become more compelling when comparing on premiums. For a ₹10-lakh cover (family floater) in case of Manipal Cigna, for instance, the premium for Arogya Sanjeevani works out to around ₹11,129 (excluding GST). In contrast, the premium for the ProHealth plan (Protect version, family floater), is ₹10,364 (excluding GST). Pro Health offers in-built features including OPD coverage, annual health check-up, health rewards, expert opinion critical illness, and restoration benefit. There are no co-pay and sub-limits in this plan.

Though the premium for Arogya Sanjeevani may work out cheaper in some cases, it can only act as a basic health cover. You can consider this as an add-on to your existing health policy or go for other standard covers such as Mashak Rakshak along with it.

Mashak Rakshak, the standard vector-borne-disease policy, covers against dengue, malaria, filaria, kala-azar, chikungunya, Japanese encephalitis and Zika virus.

Since it a benefit policy, if you are hospitalised for one of the seven vector-borne diseases, you will get the benefit from this policy and can also claim hospital expenses (if any) under your regular health policy. Do note that insurers including Bajaj Allianz General and HDFC Ergo offer standalone vector-borne-diseases cover as well. So it may pay to compare the premiums before signing up for Mashak Rakshak.

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