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India, as a country, is highly under-insured. Even among those who hold a life insurance policy, the coverage amount is seen to be inadequate in most cases. While term cover is primarily taken to compensate the family monetarily in case of death of the earning member, in majority of cases, the coverage amount is randomly decided without considering the aspects of goals and liabilities to be compensated.

Reasons for low insurance penetration in India Lack of awareness: The primary reason for low insurance penetration is the lack of awareness about insurance and limited understanding of the importance of buying a risk cover. The poor insurance penetration is also due to the high cost of insurance. Pure term insurance does not give any benefits to the insured if they survive the insurance period. Therefore, many feel that the annual premium payment is nothing but a waste, as it does not yield any income. This is also the explanation for people’s reluctance to buy life insurance.

Reliance on employer-provided insurance: An increasing number of employees rely on employer-provided group insurance cover. The cost of insurance in this case either is borne by the employer or is highly discounted compared with market rates, so the employees can easily afford to pay. This increasing reliance on employer insurance was revealed in an Employee Benefits Trend study by a leading insurance provider. The survey, which covered over 200 employers and 2,000 employees, found that a whopping 73 per cent of employees in India expected their employers to provide a group insurance life cover, whereas only 30 per cent of employers actually offered this cover.

The study revealed that though a large proportion of employees expect life insurance cover to be a part of their compensation package, only a fraction of those are actually provided one. The remaining employees may or may not buy a life insurance policy on their own.

Is it sufficient to rely on group insurance cover The chance that the majority of employees who choose to have only one group insurance policy provided by the employer are under-insured is very high. This is because the amount of insurance an individual needs depends on a variety of factors including family size, goals, and liabilities. An employer will not consider these unique individual factors while providing the insurance cover.

Moreover, it is better to have a secondary life insurance cover and not rely solely on employer insurance for many reasons:

1. Change of jobs: When you change your job, the insurance provided by your old employer may not be continued. In the new job, your employer may or may not provide insurance. Again, if the new employer provides insurance, you will be taking it at a higher age, making it more expensive.

2. Entrepreneurship: If you wish to leave the corporate world and start your own business or freelance, you will not have any insurance if you do not have a secondary life cover.

3. Cost cutting: Employers sometimes wish to cut costs. In such cases, they may choose to discontinue this benefit because it is an additional cost to the company. This may happen when you are much older. This means that when you buy a fresh policy, it will be more expensive.

4. Waiting period: You may want to shift from one job to another but have a waiting period of two to three months. During this period, if you are not covered by any insurer, your family will not receive any benefits if something untoward happens to you.

What to look for in group life insurance cover Keeping a few important things in mind could help you get the most of your group life insurance policies: First, look at the settlement ratio of the insurer. Some employers tie up with two different insurers and you may get to choose one of them. If this is the case, choose the policy with the higher settlement ratio.

Consider the period of the policy and the amount of coverage offered to you. This should be sufficient to cover your family's goals and liabilities in your absence.

You must also remember to consider your spouse's income when you calculate the insurance need. Always keep in mind that if your employer insurance is insufficient to cover your family, you must buy a secondary insurance.

Relying entirely on employer insurance without a secondary life cover can lead to being under-insured as well as under high risk of not being covered at all. Assess your needs thoroughly and buy an insurance cover at an early age. Remember that there is no standard ideal coverage-it depends on a person's family background, number of dependents, income parameters of the family, critical goals to be completed, and liabilities on the books. Above all, keep in mind that insurance requirement is dynamic and keeps changing. You must reassess yourneeds on a regular basis to keep your family well protected.

(The writer is CEO, BankBazaar.com)