Tag Archive | "General Insurance"

Insurance Before GST: Should You Buy Before 1st July or Not?

  • Easypolicy
  • 09 Jun 2017

Hence, any changes in taxation are definitely going to leave an impact on insurance markets. That is the reason, introduction of GST (Goods and Services Tax) will affect the insurer's business largely and the prices of insurances thereof. Lok Sabha passed the long pending GST Bill on 8th August, 2016, wherein the indirect tax system (multiple/various taxes) which has a cascading effect due to double taxation on goods and services, will be replaced by uniform GST. This shall come in effect from 1st July, 2017.

Is it going to affect the insurance industry positively or negatively?

Is it advisable to buy insurance before 1st of July, 2017?

Let's find out!

It has been established that GST is a value added tax, which is being brought in implementation to eliminate adverse effects of current multiple  taxes on costs of goods and services, down the value chain. Therefore, this new tax reform, with the new service tax rate anticipated to be fixed at 18%, will leave a not-so-favorable effect on insurance industry and cost of insurance products.

·     The reason is that with GST in picture, service tax will be increased from 15% to 18%, hence the cost of buying and maintaining insurance is going to go high.

·         This is because, when you buy an insurance policy, you pay the service tax on the Risk element of premium. The risk being, the payment (term policy) made by the Insurer to you, if something happens to you. You are not paying any service tax on investment that you are making in buying insurance. After GST implementation, all insurance policies including term, health, and car will become expensive as the service taxes rate will go high from 15% to 18%. Which is by minimum 300 basis points, where one basis point stands equal to 1/100 of percentage point. This stands true for Policy renewal too.

·         The traditional insurance savings plans, better known as endowment plans currently attract a service tax of 3.75% on premium, in first year. This will see an hike up to 4.5%, which will prevail for the first year of GST. In second year the current tax slab on endowment plans is 1.88%, which will be 2.25% after the implementation of GST, second year onwards. Hence, the maintenance of endowment plans will also become expensive.

·         Talking of Health Insurance, the present rate of tax is 15% on premium, which is again rise up to 18% after GST. Same is the case with Car Insurance. GST of 18% will be levied upon every motor insurance policy you buy.

All in all, the overall cost of insuring life and assets, and making investments in insurance based products, is definitely going to rise as GST comes in force. This indicates, that buying a long Term effective plan or term insurance before GST, to secure your life, is going to be a smart move.

Moreover, as the cost of insurance is likely to go high, the insurance market is going to become even more competitive, before the implementation of GST. The insurance provider companies are going to offer the best possible insurance products with maximum benefits to consumers. There are other intermediary costs associated with insurance premiums, such as issuance cost, agents' commissions etc. The companies are going to lower these costs to make as much sales as possible, to compensate the effect of enhanced service tax, pro GST.

If you plan to buy insurance before 1st July, 2017, which is actually a sensible move, you must go for term plans. Life insurance or term plans are the most suitable plans one can invest in, because they provide comprehensive Coverage to the Insured individual and provide for the family in the absence of the policyholder.

Other investment plans are also going to make a suitable choice only if you compare smartly.

Before you buy, you must compare the insurance products to match with your financial requirement, investment needs, tax structure, your liabilities, future objectives, cost and your insurance budget.

Tags: ,  

6 Ways to Compare Car Insurance Policy

  • Easypolicy
  • 28 Jul 2016

When it’s time for renewal of your car insurance many things are going in your mind like whether to stay with and get it renewed from the same Insurer or compare car insurance plans of other companies and see if you could get a better deal. Well, it won’t do you any harm if you shop around a bit and invite quotes from other companies. Comparing will only be in your favor as you can bargain for Premium from your existing insurer by showing the quotes received from the market, in case you decide to stay with that company. On the other hand it may help you switch to a better plan of a different company.

The bottom line is that; don’t renew your Policy before comparing. Explore your options; it is not mandatory to continue with the same insurer unless you have some add-ons in your policy which state that the benefit can be availed only if you stay with your current insurer. Now, let’s understand on what basis you should compare car insurance plans

1. Compare for premium

One of the most obvious reasons to compare insurance plans is to get a good plan with the cheapest premium available in the market. Compare online on insurance aggregator websites to get free of cost unbiased comparison at a single web location. Thus, in a very simplified way you can get multiple car insurance quotes to compare on a single website.

2.  Highest IDV

Especially in case of high end cars the owners want to get the highest IDV (insured declared value). IDV is the highest value recoverable from the insurance company in case of total loss. When your car is expensive one must go for the company offering the highest IDV.

3. Minimum IDV

Just like highest IDV companies have a cap of minimum IDV as well. When your car is old and to save upon premium is your primary objective, in such case look for insurers agreeing to insure your car at the minimum IDV. As premium increase with the raise in IDV you need to compare plans on the basis of the lowest IDV a company is willing to insure your car at when looking insurance for an old or inexpensive car.

4.       Maximum cashless facility/garage

Just like Health Insurance segment, cashless Claim facility is gaining momentum in the car insurance space. Insurers boast of the strength of their tie-ups with numerous motor garages wherein you can send your car for repairs and not pay upfront. When comparing on the basis of network strength ensure that the garages near your vicinity form part of their network. It is of no use to you if their network garages are located at distant places.

5.       Free Add-ons

Some companies attach some free add-ons to enhance the strength of their car insurance policies. Careful market research would let you know about the companies offering such schemes. For reference, go through the following table to understand the available add-ons in the India car insurance market.

1.       Maximum add-ons

Not all car insurance companies provide all the add-ons showing in the list above. Go for companies that are offering you your required add-ons and at reasonable rates. Compare premiums after attaching the add-ons to see how much extra you end up paying and evaluated the added cost against the benefits expected to be derived from such add-ons.

I am a Safe Driver….Why is Car Insurance Compulsory For Me?

  • Easypolicy
  • 25 Sep 2014

I have seen people feeling offended when they are told that it is compulsory for them to buy car insurance if they own a car. Many car owners perceive that if they choose to buy car insurance it signals that they are not confident about their own skills as a driver. What car owners need to realize here is that accidents are unfortunate events and can happen to the most skilled person in the art. It need not necessarily be the mistake of the driver and could be an outcome of a suddenly falling tree or another car crossing the divider and colliding with your car.

There are two parts of a car insurance Policy – a third party insurance cover and an own damage cover. It is compulsory for car owners to purchase the third party liability cover, while they can skip the own damage cover if they wish. But I would not suggest even the best of drivers to skip buying own damage cover.

Accidents don’t tell you when they are going to happen and hence if you own a Comprehensive insurance policy you can drive with peace of mind. If you are truly a good driver, insurance companies have a mechanism to reward you for your safe driving skills. They provide a no-claim Bonus to car owners in case they do not file a Claim and the bonus increases progressively with every successive consecutive year of no-claim.

Car owners confident in their driving skills can also seek to lower their insurance Premium by opting for voluntary deductible. A voluntary Deductible is the amount that you agree to pay for repairs above the compulsory deductible when you file an insurance claim.