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Can we gift an insurance policy?

Bavadharini KS | Updated on September 07, 2020 Published on September 07, 2020

Unlike other accident insurance policies, Shagun can be bought for anyone — family members, extended family members, domestic help, driver, and cook, among others

Life insurance provides financial stability to the family of the deceased policyholder. Gifting an insurance policy to your loved ones is among the best ways of securing their financial future. But generally, you can only gift life insurance within your family and not to an outsider like a friend. However, the new plan launched by SBI General Insurance, Shagun, allows you to directly gift a personal accidental insurance policy not just to your family but to anyone — your friends, cook, maid or driver. Here’s a lowdown on gifting an insurance policy and also Shagun.

How does gifting work?

If there are any minors in the family, you can directly gift a life insurance plan to them, provided the minor (less than 18 years) is part of the immediate family (your child/grandchild), says Santosh Agarwal, CBO, Life Insurance, Policybazaar.com. “In the case of the life assured being an adult, you cannot directly gift a life policy,” she added.

If you still want to gift an insurance policy, say to your niece or nephew, you can be a third-party premium payer; provided, the insurer approves the request. Note that, you will only be paying the premium for your niece, while the nominee will still be the niece’s parents. If your niece is a minor, the proposer too will be her parents.

Anil PM, Head-Legal and Compliance, Bajaj Allianz Life Insurance, says, “Life insurance works on the principle of insurable interest and therefore, gifting is usually limited within family.” This is just to ensure that the claim from insurance does not result in any personal gain for the proposer. You can be a third-party premium payer, and gift insurance to your parents. But note that, if you are gifting to your parents, you can usually buy only pension or annuity product, says Anil. “Insurers will verify the relationship and premium payment capacity and the source of funds of the premium payer, and then issue the policy,” he adds.

Nominating your immediate family — spouse, children or dependent parents — in your life insurance policy is also a way to secure the financial future of the family in your absence. Any one or all can be named as nominees in life policies. Do keep in mind that it is mandatory to name a nominee at the time of buying a life insurance cover and your nominee can only be your immediate family and not anyone else.

How Shagun differs?

While one cannot gift an insurance plan outside of immediate family, Shagun, SBI General Insurance’s new product, overcomes this limitation. Shagun, a personal accidental insurance plan, is launched under regulatory sandbox. This is a framework where insurers are allowed by the Insurance Regulatory and Development Authority of India (IRDAI) to live-test, new and innovative products and services under controlled environment for a limited period (usually six months). Thus, in the case of Shagun, the validity of the product is up to January 31, 2021. And it can be purchased online or offline, across its channels.

SBI’s Shagun is like any other personal accidental insurance product in the market. It provides the benefit to the nominee of the insured in case of accidental death of the policyholder. It also covers for partial/total disabilities, permanent as well as temporary disabilities resulting from an accident, in which case, the benefit is paid to the life assured directly and the policy terminates. The claim amount varies with disabilities. For instance, 100 per cent sum insured (SI) is payable for loss of sight in both eyes, and, in case of loss of hearing 50 per cent of SI is payable. Minimum SI is ₹4.8 lakh and maximum is up to ₹20.8 lakh (metro cities). Additionally, Shagun provides ambulance cover including air ambulance (10 per cent of sum insured up to maximum of Rs 1 lakh). It also provides hospital confinement allowance. That is, daily benefit of ₹1,000-2,000 for each day of hospitalisation is provided to the insured up to a maximum period of 15 days. The Shagun plan can be taken for family members, extended family members, domestic helps, drivers, cooks, etc., in the age group of 18 to 65 years. It is an annual policy. Do note that the nominee has to be the gift receiver’s immediate family member. The gift giver cannot be the nominee under the policy.

Our take

Shagun

is like any other personal accident policy. The only advantage is that you can buy this policy for anyone. The premium for an SI of ₹4.8 lakh works out to ₹501 a year. For a cover of ₹20.80 lakh, the premium is ₹2,001. Though the premium works out to be low, Shagun is only an accident policy. If your intention is the well-being of your friend or domestic help, you can consider a term policy with accidental insurance (in-built or as a rider); this can be done by offering them the money and making them pay the premium to buy the policy, the cost of which works out in the same range.

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Published on September 07, 2020
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