India is often called an under-insured country, be it health or life cover. Many people continue to buy insurance products as an investment, and not purely as an insurance instrument.
However, insurance packages are now increasingly being bundled with a variety of financial products such as bank accounts, debit cards and credit cards. Some mutual fund and telecom companies have also joined the bandwagon, throwing in free insurance covers with their products and services.
These insurance covers are free for you and me. The service provider takes out a group insurance cover for its customers and pays for it.
Typically, people who get insurance products for free along with another product either don’t use them, or don’t know how to get the best out of them. While these products are just add-ons and shouldn’t be your main source of insurance, it doesn’t hurt to extract the maximum benefit from a product that you have anyway been enrolled into.
Types of insurance
Two types of insurance are usually sold as a package with other products — personal accident cover and travel insurance. Many credit card issuers, such as ICICI Bank, Axis Bank and State Bank of India, offer personal accident cover to those who opt for some of its cards. Based on the type of credit card, the personal accident cover can range from ₹50,000 to nearly ₹3 crore.
Personal accident covers are also offered with many bank accounts and debit cards. To keep this cover active, you have to execute a debit card transaction within a stipulated period of time. For instance, you have to transact at least once every 90 days to be eligible for the personal accident cover available for SBI’s debit cardholders. The debit card personal accident cover ranges from ₹2 lakh to ₹10 lakh for accidents leading to death (other than air accidents). For death caused by air accidents, the cover ranges from ₹4 lakh to ₹20 lakh.
ICICI Bank offers comprehensive insurance that includes purchase protection for theft of credit cards and burglary insurance, with its Diamant, Sapphiro and Rubyx credit cards. These cardholders get insurance for air accidents, hospitalisation due to accidents, travel insurance (including loss of baggage, travel documents, flight delays etc) and protection against unauthorised transaction on the credit card, among others. The insurance product that comes bundled is underwritten by ICICI Lombard. The insurance cover ranges from ₹50,000 to ₹3 crore.
Mobile phone plans
Now, there are also life insurance products being offered with the prepaid plans of mobile phone services. A few months ago, Airtel started offering a life insurance product from Bharti AXA Life for all its prepaid customers who made a ₹599 recharge. Apart from the mobile and internet benefits, the plan offered a ₹4-lakh life insurance cover.
Another instance of offering insurance with other financial products that has gained ground over the last year or so is life insurance packaged with systematic investment plans (SIPs) of mutual funds. Axis Mutual Fund recently launched a retirement savings scheme with free life insurance cover. Other mutual fund companies offer different variants of this insurance cover based on the monthly SIP amount.
The insurance covers that come bundled with mutual funds are specifically for SIP investments. They provide for a payout based on a multiple of the total term for which the SIP has been started. These schemes have a minimum waiting period of two or three continuous years of SIP payments for the insurance to become active.
Axis Mutual Fund offers a payout based on the balance SIP left in the term of the SIP on the death of the investor, to his/her nominee. So, if the term is for 10 years, and the investor dies after paying SIP for five years, the insurance payout will be equivalent to the cumulative SIP amount for the balance 60 months.
What needs attention
If you have been given a free insurance cover along with some other financial product, one thing you must remember to do is to register the details of the nominee who would get the payout in case of death. This would hold good for term plans as well.
The next thing to do is to inform the nominee of the existence of such a product in your name, and the fact that they are the nominee. This applies to life insurance products, personal accident insurance products and to bundled travel insurance products which have a payout in case the insured person dies under the conditions specified under the insurance contract. Only if the nominee knows about the payout can he/she follow the procedure to file a claim.
You should check to find out which financial or mobile service product you have that comes with bundled with insurance, and read the terms and conditions carefully. Make sure you are aware of the conditions and convey them to your nominee, too.