The insurance business in India is not just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
I have invested in a pension plan for my retirement. Keeping in mind the present rate of inflation, I am worried that what I am saving today might not suffice in the future. Is there a way to protect my savings against inflation?
Yes, you can protect your savings against inflation by choosing a pension plan that provides the option of increasing the premium as your income grows or through indexation, which is a technique to adjust premium payments with the price index.
This ensures that over the years, your purchasing power is protected against inflation.
On what basis do insurers grant life insurance? Can they also refuse to insure?
Once a prospective buyer applies for insurance cover, his proposal for insurance undergoes scrutiny. This process is called underwriting—it includes assessment of risk on the life of the proponent in terms of age, income, health condition, family history, tenure of the policy, amount of sum assured, among other things.
While scrutinizing the proposal, if the underwriter comes across a medical condition or family history that indicates a risk on the life of the proponent, the proposal for insurance may be accepted at higher rates compared with a normal life, or if the risk is higher than usual, it may be declined.
The proposal can also be declined if there is a suspicion of moral hazard.
Readers are welcome to write in with their queries to email@example.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is T.R. Ramachandran, managing director and CEO, Aviva India.