Insured declared value of car is typically fixed for a particular model and age

My mother has a health policy for many years now. She bought it through a public sector bank. Recently, the policy was discontinued by the insurer and my mother was asked to migrate to another policy, which came with a lot of disadvantages as the original policy’s premium and terms were different from this one. The premium is nearly double. What should we do?

—M.V. Gupta

Health insurance policies offered by banks and non-banking financial corporations are generally based on a group platform. Because of the large scale, these institutions are able to negotiate better premium and benefits for their customers. Premium for renewal is based on the claims experience of the specific group. In several such cases, premiums have been kept low over many years despite high claims. However, the premiums can change every year. This is different from the principles of individual insurance. Under individual insurance, premiums are fixed for a specific age band and cannot be increased based on the claims experience of specific policies. Also, an individual plan is renewable for life. So if you get an option to migrate to an individual plan, you must take it. This will allow you to offset the time covered in the group policy against the waiting period of the individual policy. Such facility is only available if you choose the individual plan offered by the same insurer.

Once you have an individual plan, you can, in future, port it to cheaper individual plans during subsequent renewals. All your accrued waiting periods will be then carried forward to the new insurer. At an older age, it becomes difficult to buy a fresh cover, more so, if the individual has an adverse medical history.

I have a nine-year-old car on which I get 50% no-claim bonus. Its renewal is due in a few weeks. I am looking to drive it for as long as possible. With an old car, is it advisable to get own-damage cover with a higher insured declared value (IDV) or get lower premium with a lower IDV?

—Simran Gandhi

IDV is the sum assured for the car. In case of total loss, for example, or theft of the car, the full IDV will be paid to the policyholder. The IDV is, typically, fixed for a particular model and age. This means that you should not have flexibility in selecting IDVs. Practically, though, there are small differences in the way insurers calculate IDV. If you have a choice, then opt for high IDV for effective coverage. With a no-claim bonus of 50%, the impact of a higher IDV on the premium will be marginal for you.