Life insurers have mooted for a proposal to make term
insurance mandatory for all salaried employees in organisations in the country.
As per the industry insiders, life insurers are keen to make term insurance,
the purest form of insurance, to be made compulsory for all salaried employees,
and have requested the government to include the proposal in the Union Budget
for 2014-15.
“When third party auto insurance is mandatory in India, then why not term insurance,“ said a senior official at a life insurance company. Not just from an insurance perspective, but also from a customer perspective it would be beneficial, he added.
A pure term insurance policy is an insurance in which the insurer pays out the entire sum insured to the nominee/legal heir, if the policyholder dies within the policy tenure. And, if the policyholder survives beyond the tenure, the insurer doesn't pay any money. While, some term insurance products come with money-back feature, in which insurers pay back at end of the tenure, even if the policyholders survive the tenure.
Life insurers have argued that unlike other countries, India does not have a social security scheme to deal with insurance needs of individuals. In such a condition, mandatory term insurance could be beneficial for the policyholder.
The existing options provided by companies look solely at wealth accumulation and savings and not on individual life risks, a senior executive at a large insurance company said.
Although, the mandatory term insurance proposal would definitely raise insurance penetration in the country; however, it would be a big challenge to implement. Since, companies already have provident fund and gratuity for employees; they may not be open for having another mandatory scheme for employees. The structure and mechanism of this mandatory term insurance proposal is still being discussed.
“When third party auto insurance is mandatory in India, then why not term insurance,“ said a senior official at a life insurance company. Not just from an insurance perspective, but also from a customer perspective it would be beneficial, he added.
A pure term insurance policy is an insurance in which the insurer pays out the entire sum insured to the nominee/legal heir, if the policyholder dies within the policy tenure. And, if the policyholder survives beyond the tenure, the insurer doesn't pay any money. While, some term insurance products come with money-back feature, in which insurers pay back at end of the tenure, even if the policyholders survive the tenure.
Life insurers have argued that unlike other countries, India does not have a social security scheme to deal with insurance needs of individuals. In such a condition, mandatory term insurance could be beneficial for the policyholder.
The existing options provided by companies look solely at wealth accumulation and savings and not on individual life risks, a senior executive at a large insurance company said.
Although, the mandatory term insurance proposal would definitely raise insurance penetration in the country; however, it would be a big challenge to implement. Since, companies already have provident fund and gratuity for employees; they may not be open for having another mandatory scheme for employees. The structure and mechanism of this mandatory term insurance proposal is still being discussed.
Source: http://www.insuringindia.com
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