Team AckoJun 7, 2022
A huge segment of the Indian population is underprivileged. Due to this lack of privilege, they do not have the capacity or access to benefit from various financial services such as banking, insurance, credit, etc. This is where concerned authorities step in and help such sections of society to empower them and grant access to financial products and services. Microinsurance is one such effort to help people belonging to the low-income group. Read ahead to know more about Microinsurance in India in detail.
Microinsurance is a category of insurance policies designed for the betterment of the economically vulnerable population of the country. This category has been created by the Insurance Regulatory and Development Authority of India (IRDAI). Microinsurance is governed as per the IRDAI Microinsurance Regulations, 2005. Such a policy can belong to General Insurance as well as the Life Insurance category. However, the defining quality of such policies is that the sum assured offered by them is equal to or less than Rs. 50,000.
Microinsurance can enable some sort of insurance cushioning for the economically vulnerable population. Such plans can provide a sense of security to low-income people that are unable to afford the popular form of insurance.
Microinsurance plans can be divided into the following two broad categories.
A General or regular Microinsurance product covers health insurance, personal accidents, and assets such as livestock, hut, etc. This product can be availed at an individual or a group basis.
A Life Microinsurance Plan can be Term or an Endowment Plan. It can be purchased at an individual or a group level and with or without an accident benefit. Such plans can also be related to health insurance.
Here are some points highlighting the working of a Microinsurance Policy in India.
Microinsurance policies are distributed via Non-governmental Organizations (NGOs), Self-help Groups, and Micro-finance Institutions.
The premium for such plans is nominal to widen the reach and ensure engagement at a large scale.
Insurers have the freedom to offer composite covers or a packaged product belonging to either the General Insurance or the Life Insurance category.
Insurers also offer some Microinsurance Policies in case the sum assured of a policy is within the range specified by the authorities.
The biggest advantage concerning Microinsurance is that it offers the opportunity for the economically vulnerable section of the population to buy insurance at a low cost. Because of buying Microinsurance Policies, they can receive financial assistance during challenging times. This will result in the safeguarding of their savings, which are usually on the lower side. Here are some top advantages of specific Microinsurance Covers.
It offers survival as well as death benefits as per the terms and conditions
Pension allowance can also be built-in
Covers life risk with accidental benefits
Some insurers offer permanent disability benefits
It covers pre-and post-hospitalisation expenses
Covers medical bills for diagnosis, medical bills, etc.
It offers coverage due to damage/losses of properties due to natural calamities.
This policy offers compensation due to the theft of assets.
Here’s why such policies are important.
They are an accessible risk-management tool to reduce financial vulnerability in times of adversity.
The affordable premium of such plans is an incentive for better reach in an organized manner.
Microinsurance covers the policyholder’s financial liability as per the chosen plan.
Microinsurance helps the poor to save money.
Can bring about a positive change in poor people’s perception of insurance.
This section will throw light upon some questions and answers related to Microinsurance Policies in the country.
Microinsurance is a category of insurance policies tailored for the economically vulnerable to insure themselves, their household and other assets at a lower premium.
As per IRDAI regulation, the maximum sum assured under Microinsurance is Rs. 50,000 or lower.
Microinsurance plans need to be positioned as low-priced plans. This will not be possible in case the sum assured is on the higher side. The higher sum assured would lead to a higher premium, which will defeat the purpose of the plan.
Microinsurance is crucial for the lower-income group to protect the little savings that they have. It helps cover future liabilities at a low cost. By paying a comparatively lesser premium, they can get a sum assured up to Rs. 50,000. In the absence of such a plan, their savings can get exhausted due to a once uncertain event such as a natural calamity.
Micro health insurance is a type of Microinsurance Plan offered to the rural section in India. It usually covers illness, injury, and medical bills within a lower insurance premium.
Microinsurance is a tool to support individuals with low incomes and to meet their insurance needs at a lower premium. On the other hand, Bite-sized Insurance is a category for short-term policies curated to cover specific needs such as domestic travel insurance, or trip insurance, etc.
Yes, a pension-related component can be built-in the policy. This brings in the savings element in the cover.
Such a feature can be allowed in some type of Microinsurance Policies. The details can be checked in the individual Policy Wordings of the policy.
A refund can be provided in some situations in case of a Microinsurance Term Insurance Policy. For example, a refund to the family is possible in case of suicide within a year of policy purchase.
Yes, such a cover can be availed under the products offered under the Microinsurance category in India.
In India, Microinsurance is directed towards the economically vulnerable section of the society. In other countries, this direction can be towards other sections of the society based on their economic, geographic, and societal challenges. For example, some countries have Microinsurance Policies for disaster relief.
The basic difference between General Microinsurance and Life Microinsurance Policies is that General Microinsurance Policies covers health and property of the insured while Life Microinsurance Policies cover the life (for example, death benefit) of the insured.
As Microinsurance is a category and not a specific policy, the eligibility criteria to avail the policy will depend upon the specific policy’s terms and conditions.
Microinsurance as a category came into existence to serve the economically vulnerable section of the society by providing them an opportunity to avail insurance benefits at a low cost.
There are no standard set of inclusions and exclusions for such plans. The inclusions and exclusions of Microinsurance Plans will vary as per their cover and the premium.
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