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Pick bite-sized insurance policies only for small, temporary needs

Small-ticket plans can be a starting point for new buyers. But don’t treat them as substitutes for full covers.

, ET Bureau|
Aug 19, 2019, 06.30 AM IST
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The key benefit is the nominal premium that such products typically charge.
Small is big seems to be the latest mantra in the insurance space. Several insurers and intermediaries have recently rolled out life as well as non-life covers with bite-sized premiums through various digital channels. Max Bupa and Edelweiss Tokio have tied up with Mobikwik to offer cover for vector-borne diseases and term insurance plans, respectively. Other covers like dengue insurance, fitness insurance and mosquito insurance are being offered by Apollo Munich and Bajaj Allianz through Toffee Insurance, an intermediary focussed on sachet covers.

Cheap premium, easy purchase

For insurers, such products are easy to place through digital platforms frequented by youngsters. The process is largely digital and does not require a proposal form or medical tests. For a generation that abhors paperwork, medical tests and elaborate processes, this is a major convenience point. “Bite-sized insurance gives a simple one-click solution to young customers. More importantly, this model helps the younger customers get accustomed to the concept of life insurance,” says Sumit Rai, MD and CEO, Edelweiss Tokio Life.

Bite-size model also allows insurance to target seasonal needs. For example, Max Bupa has tied up with Mobikwik to offer vector-borne diseases insurance to cover dengue and malaria, which is a concern in India during the monsoons. “Similarly, as we progress into winters there would be increasing incidences of air borne diseases, especially in NCR,” says Ashish Mehrotra, MD and CEO, Max Bupa.

The key benefit is the nominal premium that such products typically charge. For instance, Max Bupa’s vector-borne diseases cover is priced at Rs 49 and the cost of Chola MS’ Rs 1-lakh accident cover is Rs 20 (see graphic). Also, the insured does not have to commit for the long term as they come with short validity. Since the premiums are small, you can choose to not renew the cover next year without incurring any major loss on premiums paid.

Sachet plans to pick from
Low costs also mean that you will get limited coverage
Source: Respective companies and websites. *Double the limit in case of ICU

Should you bite it?
Such products may not burn a huge hole in your pocket or have any adverse longterm implications, but you need to bear a few things in mind before making the purchase. Foremost, do not treat them as substitutes for full-fledged, comprehensive life and health insurance covers. These covers will not fulfil all your health and life insurance requirements. For instance, a vector-borne diseases cover will not help should you need to undergo a surgery, for say appendicitis. A comprehensive health cover, on the other hand, will insure such surgeries too.

Health insurance should be purchased with adequate research as you will need it for life. Retail health covers are renewable lifelong. On the other hand, long-term availability and pricing of bite-sized products is unpredictable as they are largely sold through group platforms. The insurer and intermediary could decide to part ways later or change the terms and conditions in the subsequent years, leaving you in a lurch. As premiums are linked to age, you may find it difficult to find a cost-effective health or life cover if you postpone buying one on the back of your bite-sized cover portfolio. Likewise, banking solely on group term insurance could put your family’s finances in a vulnerable position in case such situations arise.

Experts say that small covers should be picked for temporary requirements, as a supplement to adequate long term coverage. “Such covers are best attached to another purchase rather than as a standalone buy. For instance, a person booking a train ticket from IRCTC website might buy travel insurance just for that trip,” says Kapil Mehta, Co-Founder and CEO, SecureNow. com, an insurance intermediary. Rai concurs. “If an individual needs a temporary enhancement in their existing cover, these serve that need well. Alternatively, first time buyers can choose these for starters and subsequently add long-term coverage as per their need and requirements.” While they provide convenient entry points, always look to buy full-fledged life and health covers at the earliest.

Most importantly, keep an eye on the exclusions and deductibles. For example, Apollo Munich’s fitness insurance comes with a deductible of Rs 500, which means in the case of an OPD claim you will have to pay up Rs 500 before the insurer chips in with the rest. “In dengue covers there are limits on platelet count in some cases. Hospitalisation is sometimes mandatory even though dengue can be treated well at home. Hospital Cash may require a minimum number of hospitalised days to begin claims. There will be an upper cap on number of days you can claim for,” Mehta says. Don’t let the nominal premium blind you to the fine print as it can come to haunt you when you need the cover the most.

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