Most non-life insurance policies−be it health, personal accident, auto or home−are contracts renewable yearly. Barring a few two- and three-year covers introduced by non-life insurers, most policy holders receive yearly renewal notices for the payment of their premiums to retain their insurance covers. With the advent of technology, it has become a hassle-free act in most cases. All you need to do is to read the text message from your insurer, click on the link given in it, tick the accept term and conditions box and make the payment online. Within a minute or two, the policy document hits your email inbox.
Review your renewal notice
It is a sacrosanct document, most experts say. It is the base of the contract you are entering into. Do check your name and other details. Check what you are insuring. For example, if you are renewing a personal accident insurance cover, do check the coverage offered for each event−accidental death, total permanent disability and temporary total disability. Note that the sum assured varies from cover to cover. If these aren’t what you had opted for, bring that to the notice of your insurer.
NCB (no claim bonus) is an incentive offered by the insurer to policyholders for not making any claims during a year. So your health and personal accident insurance policies would have enhanced sum assured for the same premium. Do check if the sum assured has gone up in line with what is mentioned in the original policy document. “Typically, you would see a five or ten per cent increase in sum assured at the time of renewal, subject to the overall cap defined in the policy,” says Saroj Satpathy, executive director-insurance broking, Salasar Services, an insurance broking firm based in Mumbai.
In auto insurance policy renewal, no-claim bonus results in lower premium payable as the sum assured keeps falling in line with the insured declared value (IDV). IDV is the fair value of the vehicle which is payable in case of a total loss situation. Most individuals overlook the NCB when they sell their car and upgrade to a new one. But that may not be a wise move. “Seek a certificate of NCB from the insurer. The NCB follows the fortunes of the car-owner and not of the car. You can carry your NCB to the policy of your new car,” says Saroj Satpathy. The premium payable on the new car is adjusted by the insurer when you submit the NCB certificate at the time of purchase of the insurance policy. The discount offered by the insurance company depends on how much NCB is accrued on your old policy.
Renewal of the policy is an opportunity to the insurer to sell more add-ons to the insured. However, do not blindly accept what is on offer. “Do check the base cover and if it is adequate. If it is not adequate, better spend some more money on enhancing the base cover itself. If you are going for an additional cover or policy from the same insurance firm, you may want to check if that additional cover is really required,” says Sanjay Datta, head reinsurance and claims, ICICI Lombard General Insurance Company. For example, if you have a health insurance policy that offers a sum assured of Rs 2 lakh for a family of four, it is time to enhance it to say Rs 3 lakh if not Rs 5 lakh. Instead of buying additional cover such as hospital cash benefit or buying a dengue cover, it makes sense to enhance the base cover itself.
“While increasing the sum assured in your health insurance policy, if the increase you are seeking is far more than the existing cover, you may want to go for a super top up plan to make it cost effective,” says Sanjay Datta. For example, if you have a family floater health insurance policy with a sum assured of Rs 3 lakh and want to enhance it to Rs 5 lakh, the base cover itself can be enhanced. But if you are looking to buy a larger cover of, say, up to Rs 10 lakh, then it makes sense to continue with existing policy and purchase a separate super top-up cover of Rs 7 lakh with a deductible of Rs 3 lakh.
There are other situations where you have to consider what is on offer, carefully. “If your insurer is offering you engine cover benefit in a motor insurance policy, then it is a must buy if you are living in a city like Mumbai where flooding is a very common phenomenon. If your travel is primarily within a city like Mumbai, then the road-side assistance rider may not be of much use. Again, even if you are a frequent traveller to other cities and the outskirts, you may want to go for the road-side assistance rider. But do check if you are getting the same benefit at a cheaper rate by vehicle manufacturing company as a part of extended warranty service than what the insurance company is offering,” says Saroj Satpathy.
Terms of coverage
Many insurance companies refile their policies to offer enhanced coverage. Many new benefits are added to existing policies. It is binding on the insurer to inform the insurance buyer about such changes at the time of renewal. They are mentioned in the renewal notice. “You must go through the modifications in the terms and conditions of the cover before you go for renewal of the policy,” says Sanjay Datta.
Changes in terms and conditions can materially change your insurance cover. “If you are not happy with the changes or are looking for enhanced insurance cover along with higher sum assured, you can choose to port your policy to another insurance company,” says Pankaj Mathpal, managing director and CEO of Mumbai-based Optima Money Managers.
Assessment of risk
As the insurance firm is bound to inform you about the changes it intends to bring in the insurance contract, you too are bound to inform the company about any modifications made to your vehicle. This is relevant to auto or vehicle insurance. “Do inform the insurer about the changes you made to your car in the past year, say installation of a gas kit, installation of an anti-theft device,” says Pankaj Mathpal. Such alterations materially change the risk involved and in turn the premium payable. The insurer may decline to settle the claim altogether if you do not inform the company such changes. Ideally, you should be informing the insurer at the time of installation. But if you have not, do so at least at the time of renewal of the policy.
If you have chosen to insure your white goods under the home contents insurance policy, do inform the insurance company of all removal, addition and changes in your asset list. Otherwise, settlement of the claim in case of loss can become difficult.
Premium only one consideration
Many insurance buyers consider this to be the most important factor when they renew their policy. However, one should review several other aspects as mentioned earlier and finally consider the premium, as it is a function of the type and extent of covers and add-ons that you seek. The price becomes a bone of contention in auto insurance. In order to reduce the premium, many times the IDV of the vehicle is reduced by five or 10 per cent. This leads to some fall in premium payable. However, in a case of total loss situation the settlement amount payable to you falls proportionately.
Always ask for a premium break-up for each cover that you buy. You will come to know where the premium discount is coming from and what its implication is. Not all discounts would be in your best interest. A premium discount given to you by bringing in a cap or a deductible in the coverage, effectively reduces the sum assured. Sometimes, the insurer may offer bundled products to bring down costs. However, the coverage options are specified by the insurer.
Renewing your insurance policies are essential to ensure all your risk cover continues. It not only lets you enjoy no claim bonus but also helps you on account of conditions such as pre-existing clauses wherein pre-existing conditions are covered only after two or four years of waiting period. Renew your insurance policies well ahead of the expiry date of the cover and ensure peace of mind.