In a circular released this week, the Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurance companies to launch individual and group unit-linked life and health insurance products and 'combi products' without seeking prior approval from the regulator.?
The circular released on June 20, 2023, talks about?IRDAI adding more categories to the existing 'use and file' procedure for life insurance products to expand its scope.?Till now, the 'use and file' norms applied to individual Ulips offered with existing and approved funds. Group Ulips were not a part of it. Under the revised procedure, the insurers are now permitted to 'use and file' group unit-linked life and health insurance products.
Irdai has also introduced combi products ¡ª the insurance products where life insurance acts as the lead insurer. This move will allow customers to buy comprehensive insurance coverage under a single policy as insurers can offer bundled products now. The insurance companies offering combi products must comply with the extant norms prescribed by Irdai, the regulator said, as per ET.
These recent changes will allow insurance companies and new insurtech players to come up with combo products such as '3 in 1'? product that covers life insurance, health insurance and investment, as per the different needs of the people.?This circular will come into force with immediate effect.
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While this may seem like a lucrative 'combo' product that can give the three in one benefits of life and health insurance, and investment, mixing insurance with investment may not be a good idea.
Let's keep it simple and straight. Insurance is not an investment. When you invest your money somewhere, you expect something back. But when you take insurance, the aim is to cover the risk, Whether it's the risk of death which life insurance covers or the risk of burdening yourself with hefty medical expenses in the absence of health insurance.
Many people tend to stay away from pure term insurance despite its benefits, simply because they want 'something in return' for the money paid in premium. That lands them into buying sub-optimal insurance products or combo products that offer 'some returns' such as your premium paid back or investment of a part of your premium.
But amid all this, the purpose of life insurance gets lost. If you die, pure-term insurance gives your nominee the assured sum. If you live, no one gets anything. And perhaps that is what life insurance is all about, right? To cover the risk!?
Similarly, in the case of health insurance, it's better to keep things simple and buy adequate and reliable health insurance for yourself and your family, as a single hospitalisation bill can eradicate your lifelong savings.
Now, those who tend to buy two or three-in-one products fail to realise that more often than not, policies such as money-back or endowment ones or this newly introduced ¡®3 in 1¡¯ combined insurance cum investment product neither provide adequate cover nor generate optimal returns.
That¡¯s why it's better to keep things simple and separate. You can avail of a term insurance plan to adequately cover your loved ones at low premiums and for investing, you can take a call as per your risk appetite and investment horizon. Click here to better understand how you can start investing.
Also Read:?How Much Tax You Pay For Your?Investments
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