LIFE INSURANCE ISSUES
Author: Rini Rastogi, III year of B.A., LL.B. from PSIT College of Law, Kanpur
Life insurance is a contract between an insurance policyholder or an insurer, where the insurer promises to pay an amount of money in return for a premium, upon the death of a policyholder. The policyholder typically pays a premium earlier either regularly or gives an amount and other expenses such as funeral expenses, also be included in this contract. These life-based contracts can be categorized into two categories: Protection policies and Investment policies.
In the whole world, the most dangerous thing which created fear is none other than the deadly disease known as Coronavirus or Covid-19. It not only disturbed the life of an individual but also disturbed our economy. It spreads crises everywhere in the whole world. As of now, more than 4.26 million cases have been reported across 187 countries and territories, resulting in more than 291,000 deaths. And in India, about 74,925 cases have been reported and about 2,436 deaths have occurred. In such a critical situation we all have to stand up together and fight against it. Now as the death rate is increasing day by day in India the chance to get insurance is also increasing. But, the question arises, will a life insurance policy cover the death of a policyholder due to coronavirus? Also, will you be able to get a life insurance policy after contracting the virus?
The answer to this question is, if the individual who passes away due to the coronavirus has a life insurance policy, the nominee of the policy will get the sum assured as the death benefit. If the deceased person had a life insurance policy, then the nominee or the beneficiary nominee must know that the death caused by health-related issues are generally covered under a life insurance policy including term insurance," says Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com. This means that when the insured person dies, the death benefit is paid to the nominee or the beneficiary nominee after a valid life insurance claim is filed. Agarwal said, "Existing life insurance policyholders are covered. While some life insurance policies have exclusions for a specific cause of death, coronavirus will be covered if you already have an existing life insurance policy." So if you are planning to buy an insurance policy now, then you should keep in mind that the insurer would determine the premium based on your health and medical history.
Applying for life insurance
If we see today's scenario in the context of Coronavirus, it will likely have a larger impact on people who are applying for a life insurance policy than those who already have their policy in place earlier. For example, if you are applying for life insurance today and also planning a trip to a country that is heavily suffering from this deadly disease then in such case, you will need to wait until after your return to complete your application. Due to the current and faster spread of this disease, there is also a chance that your application would get affected if you are travelling. Many insurers may postpone application approval if you have returned from travel outside within the last 30 days or have plans to travel abroad. Additionally, some life insurance companies may postpone your application if you have a member of your household who has recently returned from travel outside or if you have come into close contact with someone who has tested positive for COVID-19.
There is also some sort of restrictions on your application if you are older or facing any medical or health issues which might make you susceptible to the Coronavirus. Most companies do not make any changes in an insurance policy but some of them adjust their maximum insurance age and insurable underlying health conditions, which could make you ineligible for life insurance if you shop with the wrong insurer.
How stay at home mandates could affect your application?
If you are quarantining in a state other than the state you permanently reside in, this could have implications for your residency on your life insurance application. Some life insurance companies are requiring that your paperwork match the state you are currently in, even if it is not the state you reside in. Others are still accepting paperwork for the state you permanently reside in. Because this varies for each life insurance company and application, you'll want to discuss how to proceed with your application with your life insurance agent.
The Life Insurance Medical Exam
Before you take your life insurance it is necessary to give a medical exam but if we see today's condition is it safe to take the medical exam during this condition?
The answer to this question is yes, it is safe. Medical examiners are taking a lot of precautions during this pandemic. They perform their exams by applying extra care like washing hands with soap and water, wearing masks, using a sanitiser. And they also protect their equipment such as gloves and masks to cover their nose and mouth. But not every life insurance policy requires a medical exam. While a no medical exam life insurance policy might not always offer optimal coverage, you have a few policy options that don't necessitate a medical exam and can offer you some protection during the coronavirus pandemic. It's important to note that getting a policy that doesn't require a medical exam still requires recent medical records and doesnt necessarily shorten the life insurance application process. If you want a faster turnaround time after you apply, you'll have to get a plan with accelerated underwriting.
Now if we talk about how to buy a life insurance policy during this Coronavirus pandemic, then we see as people are more aware of their financial risks and mortality which are associated with this, they just want to ensure that their families have nothing to fear about this pandemic. It will bring new policies as we see the effects of this deadly disease. If you are healthy and have not any symptoms of Covid-19, then you will likely be allowed to apply for an insurance policy just as you would do before this outbreak. You will be asked to provide certain information about your health and maybe a few related questions regarding the virus may also be asked. If you've recovered from the coronavirus or you currently have it, you may still apply but the insurer may be hesitant about giving you a policy until you recover, or they have more information about your health as a whole.
Factors affecting life insurance premiums
1. Demographics: As age and gender are considered to be an essential factor before any company gives you insurance so, the insurer takes them into account when determining your policy rates. Your age is important because as we age, we become more susceptible to illness and injury. Your gender will be considered because on average, men die sooner than women. This can be attributed to the reckless behaviour of other lifestyle choices.
2. Current health and medical history: The insurance company also checks up your health history and also your family's history that no one can suffer from any illness which is incurable and if anyone suffers then it will be difficult for you to get a policy. If you or your family have any history of illness that makes you more susceptible to the new coronavirus, you are likely to face more problems in getting a new policy or you will at least have to pay to cover that risk.
3. Dangerous occupation: Jobs like risking life such as recycle and trash collectors, aircraft pilots, roofers, fishers, etc. These all put their life at risk to do their job for the sake of society. However, it should come as no surprise that jobs that pose a risk to your life will not be looked at favourably by your insurer.
4. High-risk Habits: Just like your professional job, your habits also matter what you do in your time and it could harm your policy too. Any dangerous or bad habits would have put your life in danger and will likely have to pay more for each month than your coverage. The most common high-risk habit is smoking as it has been shown time and time again to cause lung disease, cancer, and many other related illnesses. Another type of risk-taking behaviour is extreme sports that put you in unnecessary danger. Base jumping, skydiving, and anything else where the risk is what makes it fun will be a hard pass from your insurer.
5. Active Military Status: Our soldiers perform their duties with great courage, though we all know that it is one of the toughest jobs and our active soldiers must face the chance of death every single day at the hand of our nation's enemies. The U.S. Department of Veteran Affairs offers Veterans Group Life Insurance (VGLI) for a certain period after active-duty life insurance ends. If you were injured or suffered some impairment during your active-duty service, you can apply for an extension before you have to apply for the VGLI.
Challenges for Insurance Business
1. The transition of the insurance industry from a public monopoly to a competitive environment now presents very interesting challenges, both to the new players and the customer.
2. Currently, the product market relationship is dominated by only such personalized selling which is rendered by toed agents. So, for agents, it is also necessary to undertake the difficulty to accept the requirements of the population. Also, companies have to change their customer- agent relationship to their value-based client relationship.
3. Insurance business on averages of risks. So, a flexible price structure for sustaining customer confidence and interest will be a challenging task before an Indian insurer.
4. The majority of insurance companies today are under tariff, which means these companies cannot price the product to suit the customer of the customer group.
5. There is a huge untapped potential in India, which needs to be targeted. The distribution channel is a medium to reach the masses in urban,semi-urban, and rural areas. So, the insurance company should focus on pricing, distribution, risk management, and investment decision making.
6. Another challenge is attracting committed and qualitative talent to the industry. It is necessary to have a good quality sales manager and agent advisor to need-based selling and right selling.
Measures to counter the challenges of the insurance business
1. In the insurance business, cost control and the ability to serve a large number of customers are some typical issues. So, modern technology is to be adopted to handle both the services effectively.
2. Today, customers are well- equipped with information and technology, so insurance companies should reposition different products by changing customer attitudes. It helps both the customer as well as the insurer.
3. Direct marketing is one of the most successful channels of distribution in developed economies. It is a great way to reach a large population. So, the product should be sold through telemarketing or direct mail.
4. Insurance companies in India will have to develop more appropriate channels to tap such a huge market as the core of the insurance business hinges on an efficient distribution.
5. Indians are inclined towards savings and research has shown that life insurance is the first financial product the majority turn to.
6. The actuary should be required to attend the minimum number of seminars called continuous professional development courses for financial control of the organization.
So, from the above, it can be concluded that in our country the insurance penetration is very poor. The insurance markets have witnessed a dynamic change in which both the life and non-life segment are included. Almost all the private companies in the present time have formed a joint venture with recognized foreign players across the globe. To be successful, a company must have quality people, innovative management, be able to employ technology effectively, besides having the right products and distribution channels.
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