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Lessons to learn from first wave of COVID-19 pandemic

The second wave of the ongoing COVID-19 pandemic continues to batter India in a way like never before as the country continues to report over 1.80 Lakh COVID-19 positive cases and close to 1,000 deaths every day for the last 10-days. Despite the government’s growing sense of foreboding, the second wave of coronavirus has engulfed India in such a manner that each day marks a fresh grim COVID-19 milestone.

After a sudden fall in the number of positive cases from November – January, the country has once again outstripped Brazil to become the second-worst affected nation globally. What is more concerning is the fact that this very time, younger people between 20 and 45 – the most economically productive age group in India – are getting seriously affected and are being hospitalised with severe symptoms. Unfortunately, the second wave of the ongoing pandemic is hitting India’s workforce hard.

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Learning from the past

Within the first six months of the COVID-19 pandemic in India, the queries for both life and health insurance shot up by 100 per cent in comparison to last year. While several industry experts connected this massive growth to an increase in awareness around the importance of insurance for financial protection against the pandemic, many even remarked it as ‘panic-buying.

Numerous people bought a term or health insurance policy fearing they might get infected with the virus anytime and may need hospitalisation or probably even die if the conditions worsen. This panic situation left people to buy products that may prove to be inadequate if the need arises. While the intent – building a financial blanket – was right, the choice of policy, coverage amount, or tenure may not be sufficient.

There were several incidences where customers fell short of the sum insured during hospitalisation due to COVID-19 and the family members had to borrow money from friends or break into the savings to pay the remaining hospital bills.

In certain cases, the dependents of the term insurance policyholders found the sum assured/coverage amount significantly less which was not even enough to pay for daily expenses. And, with the pandemic situation getting worse this year, it is feared that people might not just follow suit and buy insurance plans that even fail to deliver their core purpose – adequate financial protection at the time need.

It is important that people must learn from the mistake of others! One important thing that customers must know before buying any insurance policy is that insurance is a one-time purchase that must be bought with utmost consideration to avail its maximum benefits at the time of need.

Term Life Insurance

While it is good that people bought insurance in elevated numbers, it is equally important to buy the right products that precisely cater to your specific needs and requirements. Talking about term life insurance, given the severity of the virus, it is very important that you cover yourself under a term insurance plan, especially if you are the sole breadwinner of the family.

While deciding on the sum assured, there are a plethora of things that you must give due consideration like your annual income, family’s monthly expenses, loans, if any and one-time expenses like child’s education, marriage and spouse’s retirement. Ideally, the sum assured of your term insurance plan must be 20 – 25 times your annual income while the policy tenure must be until your retirement age – mostly between 60 – 65 years.

Another important thing that must draw your attention is Claim Settlement Ratio – the total number of claims settled of the total claims received. Always go with the insurer that has a higher claim settlement ratio yet offers term plans at affordable premiums.

Health Insurance

Yet another major insurance cover that you need during unprecedented times like these is health insurance. The insurance penetration level of health insurance during the first wave of the COVID-19 pandemic was remarkable as IRDAI reported that the total number of lives covered under health insurance grew from 17.83 Crore during April – September 2019 to 30.22 Crore during the same period in 2020 – highlighting growth of 69.8 per cent.

While it is good that more and more people invested in health insurance, it is also important to buy the right plan. When buying a health cover, the foremost thing to do is buy a plan with higher coverage/sum insured mostly Rs 1 crore. A higher sum insured plan promises uninterrupted coverage no matter how big is the treatment cost.

Higher sum insured plans also offers an array of additional benefits such as zero co-payment, no room-rent capping or sub-limits on different procedures and coverage for telemedicine – which is very much in need considering the rate at which the virus is spreading. These plans have become all the more affordable as now you can easily buy such policies in monthly installments.

Motor Insurance

As COVID-19 positive cases continue to rise each day, many states have again started to implement partial lockdown and restrictions to limit the movement of people and contain the spread of coronavirus. And, with offices still shut in most cities and maximum people working home, the use of private vehicles is almost negligible.

During such times, when vehicles are hardly running on roads, there is no point spending extra to buy a comprehensive motor insurance plan when you can still manage with limited coverage. To provide required coverage and help customers save on motor insurance premiums, insurers have come up with insurance plans that provide only required coverage – Third-party + Fire + Theft insurance plan. The plan promises adequate coverage against damages from your vehicle to third party and damages to your vehicle due to fire and theft. These plans are available at a 50 per cent lower premium than regular/comprehensive plans.

The author is CBO at Policybazaar.com. Views expressed are that of the author.

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