Banking and Insurance- CIA-3

1923107 Anukul Mandhania- Introduction, Need Analysis

1923134 Rahul Agrawal- Life Insurance

1923116 Gagan Jalan- Health Insurance

1923175 Mathew Kanichay- Home Insurance

1923103 Aditya Arav and 1923177 Ishan Dokania - Car Insurance

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Introduction of the person:

Name: John Benny

Male

40-year-old

Dependents: Wife (housewife 39 years) and two children one boy (10 years) and one girl (7
years),

Income: 24,00,000 Rs p.a

Job: Senior computer engineer

Location: Bangalore

Home loan of 50,00,000

Asset: SUV Hyundai Creta SX Opt Turbo Dualtone

Need Analysis

The needs approach is another simple formula that is used to calculate an individual’s life
insurance need based on several calculations.

 Sum all of the individual’s short-term needs, which likely fall into three categories:
final expenses (funeral, attorney, probate), outstanding debts (credit card, auto loan,
college loans), and emergency expenses (medical, auto/home repairs).
 Calculate all of the individual’s long-term debts and obligations, such as mortgage
and college tuition expenses, using the future value of money equation.
 Calculate family maintenance expenses (i.e., living expenses), which include
necessities such as food, clothing, utility bills, and transportation, using the future
value of money equation.
 Calculate what resources an individual has to meet their needs. Resources include all
available savings, stocks, bonds, mutual funds, and existing life insurance policies.
 The remaining amount when resources are subtracted from income needs is the
amount of life insurance an individual should consider. This number may be altered
by eliminating any unnecessary expenses.

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Calculation

Long term needs

Paying bank home loan of Rs 5000000

Education of their children 4000000

Marriage of their children Rs 500000

Long term Need = 95 Lakhs

Short term needs

Expenses on funeral ceremony 50000

Credit card bills 50000

Emergency medical expenses 400000

Short term Need = 500000

Maintenance expenses

Basic living expenses (including food, water, electricity and other basic expenses) is Rs
350000 p.a. So, for 20 year it will be Rs 12875000. (We are assuming for next 20 years
inflation will increase at 6% every year and calculation is shown in the excel sheet attached)

Interest on loan 300000 p.a. Loan has to be paid in 5 years so interest for 5 years is 3Lakh*5
= 15L

Maintenance Need = 14375000

Resources

Savings 3500000

Land (plot) 1500000

Resources = 5000000

So, Need is 24375000

Resources is 50 Lakhs

Insurance Amt needed is 19375000 or 2cr.

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Life Insurance Plan

We will opt for a term insurance is the purest and simplest form of the life insurance policy,
which offers comprehensive financial coverage to the family members against any life
uncertainty. On the premise of the term insurance plan purchased, the family gets the life
cover or the sum assured in case the policyholder passes away untimely while the policy is
still active.

A term insurance plan offers multiple benefits. Some of the key benefits of the term insurance
plan are listed below: Cost-effective Premium: An individual can get a high-value life cover
from the term plan by paying a cost-effective premium amount. The term insurance premium
amount can be made either monthly, half-yearly or yearly. The earlier one buys the term
insurance plan; the lower will be the premium amount that needs to be paid. Easy to
Understand: When it comes to buying the term plan, one of the prime features is that it is
easy to understand. As it is a pure life cover, the term plan does not have the investment
component. The individual will pay the premium and the insurance provider covers the life
for a fixed period to offer the benefits of term insurance.

ICICI PRUDENTIAL PLAN

Life Cover – Rs 2 crore

Annual Premium – 29232

Cover For – 20 years

In case of death any time before age of 60 years, your nominee will get a sum of 2 Cr.

Inclusions

Death due to any cause (e.g. natural, accidental, murder, illnesses, calamities)

Exclusions

Suicide during first year of the policy

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Free Benefits

Waiver of Premium

In case of permanent disability due to an accident, no future premiums have to be paid and
the life cover stays intact

Terminal Illness

If you are diagnosed with a terminal illness, entire life cover will be paid to the nominee
immediately

Tax Benefits

All Premiums paid up to 1.5 Lac a year are exempted from tax under section 80C. In case of
your death the life cover paid to your nominee is completely tax free under section 10(10D)

T&C

Benefit is available only when you have opted for a variant where premiums are paid
throughout your policy

Benefit can be exercised when the remaining duration of life cover is 5 years or more

Benefit can be exercised within 6 months from the date of the life stages mentioned above

Health Insurance

Uncertainties can occur any time. We never know when a difficult situation can arise but we
can be prepared. No one plans to fall ill or get hurt, but a serious illness can strike anyone at
any time. The cost of treating the illness can cause severe financial strain on the savings you
have accumulated over time. This means that you might have to compromise on providing
your child the best quality education or defaulting on your home loan payments. Today, the
cost of medical treatment is continuously rising. This is the reason why people consider
health insurance as one of the greatest investments done towards one’s health.

In our case

Male 40 years (We have the head of the house)

Female 39 years (housewife)

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Male 10 years (the first child)

Female 7 years (second child)

We have 4 members in the family. The eldest being 40 years and the youngest being 7 years
of age. We are looking for a family floater insurance which will cover the whole family
providing extra benefits and less premium. The reason behind taking family floater over
individual health insurance is because in a floater insurance the whole family is being
covered under one plan and if any one of the members need treatment then the whole money
will be transferred to that person treatment but in an individual insurance one person’s claim
can’t be transferred to another person’s treatment. The insurance cover we are deciding is 12-
15 lakh as per the rule of 50% of the annual income. The income of the family is 24 lakh per
annum.

The most important aspects while choosing a health insurance

 Hospital room eligibility

 Bonus on no claim
 Restoration of a cover
 Health check-ups
 Existing illness waiting period
 Cashless hospital network
 Before and after hospitalisation
 Day care treatments

Now to check whether a company is trust worthy or not for which the best ratio is to check
the Claim Settlement Ratio. If the ratio for the company is above 85% then its well and good
if its not then better for us is to look for another company.

Areas not covered in a health insurance

 Pre-existing diseases (waiting period will be from 2-4 years)

 Pregnancy, child birth and vaccination (pregnancy might be included after 2 years in
some policies)
 Non-life-threatening disease like cosmetic surgery, dental replacement or joint
replacement.
 Forms of treatment like Ayurveda and homeopathy.

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 HIV/ AIDS or any other congenial disease

Best Insurance plan for the family

We chose the STAR HEALTH OPTIMA plan provided by the company Star Health and
Allied Insurance.

Comparing individual and family insurance plan

 Individual

Family members Insurance cover Premium (annually) INR

Male 40 years 5 lakh 9,529
Female 39 years 5 lakh 9,529
Male 10 years No cover below 18 years No cover below 18 years
Female 7 years No cover below 18 years No cover below 18 years

In this family plan only the parents are covered and also per person cover is 5 lakh.

 Family plan

The family pan is of INR 25,789 including all members with the cover of 15 lakhs.

 Conclusion

We can conclude family floater is far better in terms of cover, premium as well as numbers of
members covered.

Key Features: -

 No capping on room rent - Treatment at Private Single A/C room

 Cashless hospital network 9768 in India.
 Covers medical expenses incurred on Bariatric surgical procedures and its complications
 Cost of health check-up for every claim free year
 Cover for maternity (normal and caesarean delivery) and New born baby
 Automatic restoration of entire Sum insured by 100%.
 Dental / ophthalmic cover on OPD basis
 Hospital cash benefit.
 AYUSH Treatment

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 Buy Back PED (Optional Cover) - Reduction in waiting period for Pre-existing disease
 Organ Donor Expenses
 Wellness Program - Discount in the renewal premium for healthy life style through
wellness activity.
 Domiciliary Hospitalisation
 All day care procedures are covered.
 Personal accident cover against Death and Permanent total disablement (equal to the
Health Insurance cover) at no additional cost.

Advantages

 Affordable Health Insurance cover on a floater basis

 Up to 100% Increase in Sum Insured upon a claim free renewal
 Benefits include Air ambulance facility and availing Second medical opinion

About the policy

The policy name is Health Optima.

Sum insured = 15,00,000 INR

Term is of 1 year

The premium is 25,789 INR for 1 year (2,149 INR per month)

Claim settlement ratio = 94%

Incurred claim ratio= 63%

Home Insurance
Since John has a home loan, it is riskier if he doesn't have insurance to cover his home
because any damage to the house would be a double blow on him not only, he will have to
pay the loan EMI, but now he will have to pay for repairs as well. So, it is better opting for
home insurance as well when going for a home loan to protect from any financial loss in the
future.
Home being one of his most prized assets. Any loss to it, could lead to a financial setback. A
home insurance policy, can protect from losses caused due to calamities, fire incident and

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theft. House Owners Insurance covers losses and damages to an individual's house and to
assets in the house. 

Description of his Home:

Residential Flat  
13th floor
Flat size: 2000 sq ft
Location: Electronic City, Bangalore, Karnataka

 What needs to be covered:  Structure of the house and  contents like Clothing,
furniture, appliances, needs to be covered if destroyed in an insured disaster 

 Coverage in case of water-induced damage like water logging which can clog

plumbing, rot the wooden fittings and furniture and completely destroy the electric
system of the house.
 Coverage in case of fire-induced damage: Fire can cause serious damage to homes.
Fires can breakout for many reasons it can be because of electric system problems or
a gas leak an home insurance policy will provide appropriate compensation in case
the property is damaged because of fire incidents.
 Coverage in case of damage caused because of Earthquakes. Earthquakes are so
damaging that it can lead to a total and utter collapse of even the strongest of the
buildings in a matter of minutes. A home insurance policy will provide you with
claim amount if an earthquake occurs and damages your home.
 Coverage from man-made problems and damages:  when you live in society, you
are always at risk from anti-social elements. There is a constant threat of riots and
strikes. In such cases, your home insurance policy will cover the losses you have
suffered, subject to the sum insured.
 Electrical breakdown of machinery like washing machine or refrigerator
breakdown the insurance need cover the expenses for repair.

What is not required to cover:

 Cyclones: The coastal portions of India are subject to cyclones on a regular basis.
Since our person isn’t living anywhere near the coastal area, he wouldn’t need this

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 coverage. There are less chances for cyclones in Bangalore. This also isn’t available
in the basic home insurance premium and will increase the premium.
 Floods: Bangalore isn’t a very high-risk area for floods moreover living in a flat
which high in the air makes it difficult for floods to cause any damage to his home
and contents of his home. Covering this would increase the premium unnecessarily.
 Burgherly and theft: The flat has a state-of-the-art surveillance system with a 24-hour
security guard. This again is an add-on in most home insurance plans which costs a
higher premium in adding.

Amount of Insurance cover

For structure:

Sum Assured On ‘Agreed Basis’s: This is mainly applicable for Flats/Apartments. The Sum
Insured for Flat on Agreed Value Basis is arrived at by multiplying the Total Sq Feet area of
the Flat by the value per square feet. 

Flat size: 2000 sq ft residential flats

Value per square feet: 3000 Rs

Sum insured for structure: 60,00,000 Rs

Content/Belonging value:

TV, refrigerator, washing machine, dishwasher, Furniture, altogether calculated on Indemnity

Basis: The replacement value of the insured contents is calculated as ‘new item cost minus
allowance for wear & tear or depreciation’.

Sum insured for contents: 6,00,000 Rs

60 Lakhs + 6 Lakhs

Total Sum Insured 66,00,000 Rs

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Premium

The premium is calculated based on your sum insured (the amount you insure your home)

Annual premium: 4,724 Rs

As a home owner he should get a coverage up to 5 years, long term plan will keep him away
from renewal hassles help him save a bit on the way.

Premiu
Tenure m Save
1 4,724  
2 9075 373
3 13055 1117
5 19,824 3724
~Source HDFC ERGO

Total premium for Tenure of 5 years: 19,824 Rs / 330.4 Rs per month

Car Insurance

It is risky if John doesn’t have insurance specially in Indian roads as to cover his car because
any damage to the car would be a bad financial crisis to him So, opting for car insurance will
be a smart choice to protect from any financial loss in the future. Any loss to the car can lead
to a major financial setback and even lead to a life-threatening circumstance if there is a bad
accident that might happen in future. A car insurance policy, can protect you from losses
caused due to calamities, fire incident and theft. Car Owners Insurance covers losses and
damages to an individual's car and to assets in the car. Not only are cars expensive, paying for
their repairs is costly, too. Sometimes, your car may be damaged due to someone else’s
negligence. A car colliding with yours, or you swerving to avoid a jaywalker and crashing
into a wall, or even a stray cricket ball cracking your windshield can set you back by a
considerable amount of money also Some accidents result in fractures and other serious
injuries that require hospitalization. Instead of shelling out the high hospital and treatment
costs from your own pocket, you can get your motor insurance to pay these expenses and also

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the most unfortunate outcome of a road accident is the car owner’s demise. Once the bread-
earning policy holder has passed away, it might become difficult for his or her family to
sustain its daily life. However, a car insurance policy can help pay the family’s expenses after
the unfortunate event.

Car description –

Company – Hyundai

Model – Top Automatic. Creta SX Opt Turbo Dualtone.

Rs. 17.53 Lakh*

What does the car insurance cover –

I. Loss or Damage Due to Natural Calamities: Events outside of your control, such as
lightning, earthquake, flood, typhoon, hurricane, storm, cyclone, landslide, etc.
II. Loss or Damage Due to Man-Made Calamities: Man-made disasters like burglary,
theft, riot, strike, terrorist activity, and any damage caused in transit via road, rail, or
water.
III. Personal Accident Cover: This secures your family's future in the event of a
permanent disablement or in the unfortunate circumstance of your death. You can get
coverage of up to 2 lakhs for any damage caused to the driver while travelling,
mounting, or dismounting from the car. Some insurers also offer optional accidental
covers for co-passengers.
IV. Third Party Legal Liability: Mandatory by law, this cover protects you against the
legal liability of accidental damages that have resulted in permanent injury or death of
a third party. It also covers damage caused to any surrounding property.

What the car insurance not covers –

1. You, when you’re driving someone else’s car

2. Your car, when someone uninsured is driving your car
3. Damage caused when the vehicle owner is under the influence of alcohol or drugs

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4. Damage caused by the driver having no valid license / authority for driving •
Deliberate loss or damage to vehicle
5. Loss/ damage due to war, mutiny or nuclear risk
6. Mechanical and electrical breakdown
7. What’s inside your car, unless it's property specific to the use of your vehicle like a
radio player
8. Normal wear and tear and general ageing of the vehicle
9. Vehicles being used otherwise than in accordance with limitations as to use

Preferred insurance policy for John is –

Comprehensive Insurance Policy -

I. Comes with a wide range of coverage options

II. It includes the accidental damages to the third-party
III. Covers vehicle collision and other risk factors
IV. Damage due to manmade and natural disasters are covered by the policy
V. This is the highest form of insurance plan that you can buy from a car insurance
company
VI. Protection against damage from accidents even though you are at fault
VII. You can subscribe to additional riders to enhance the insurance cover
VIII. Complete protection for the vehicle including theft

Preferred add on insurance coverage –

 Collision Coverage
If you had subscribed for the ‘collision coverage’ in the insurance plan, the insurance
company will bear your car repair expenses after the accident.

 In some cases, the cost of repairs will exceed the current market value of the vehicle.
In such circumstances, the insurance company will pay the current market value of the
car.
 The collision cover should be subscribed as per the age of your vehicle. If you are
buying an insurance company for a brand-new vehicle, you should ensure that the
collision coverage is included.

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  If there is a lien on your vehicle, you should buy collision cover.
 The collision cover can be as low as possible for old vehicles.
 Personal Injury Coverage
 In addition to the mandatory liability insurance, you can include certain coverage to
overcome various risk factors.
 Personal injury protection will cover all the costs associated with the accident.
 The medical bills of the driver and other passengers will be covered by the personal
injury protection.
 Regardless of whose fault, the insurance company will pay the medical bills.
 Hence, you can buy personal injury coverage for the vehicle owner, driver and
passengers so that you can make the most of your investment.

Rides’ recommendations –

Suggestions Rider recommended/not recommended

Beginners with limited driving

experience
All aforementioned car insurance riders

highly recommended

For small cars, a few years old Zero depreciation cover not recommended

Because vehicle breakdown possibility Roadside assistance and towing rider

increases with time recommended

Those living in areas with heavy Engine coverage highly recommended

rainfall
Those without personal health Ambulance and medical expenses riders
insurance cover highly recommended

If policyholder travels extensively All aforementioned car insurance riders highly

using personal vehicle, and if the recommended

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 frequently travelled route is accident-
prone

The total value of the insurance –

In case on no parts replacement –

Here in this car insurance Insurer pays 100% of the claim amount if there are only repairs and
none of the car parts are replaced (except insurer pays only 50% of the cost of painting
materials)

Now for the other case of parts replacement the insurer will pay –

 100%Cost of replacing glass components

 70% Cost of replacing fiberglass parts
 50% Cost of the painting materials
 50% Cost of replacing plastic, rubber, nylon parts & batteries
 100% Cost of replacing metal, wooden & all other parts

Insured declared value – Rs 13,50,000

Premium amount – Rs 70,000

Per month deposit – Rs 700

References

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 https://economictimes.indiatimes.com/get-5-essential-insurance-plans-for-just-rs-
2620-per-month/tomorrowmakersshow/69426062.cms
 https://www.relakhs.com/top-best-home-insurance-plans-details-comparison-faqs/
 https://www.hdfcergo.com/OnlineInsurance/HomeOnline/Integration/Error?
exceptionErrorMessage=Agent%20code%20%3A%20A0000033%20does%20not
%20contain%20RM%20Code%20%3A%7B%7D
 https://www.policybazaar.com/health-insurance/health-insurance-india/
 https://www.policybazaar.com/motor-insurance/car-insurance/articles/5-types-of-car-
insurance-coverage-explained/
 https://economictimes.indiatimes.com/everything-you-ever-wanted-to-know-about-
car-insurance/tomorrowmakersshow/69426459.cms
 https://www.tomorrowmakers.com/motor-insurance/everything-you-need-know-
about-car-insurance-article
 https://www.moneycontrol.com/personal-finance/tools/insurance-calculator
 https://www.manning-napier.com/insights/blogs/financial-planning/3-ways-to-
determine-how-much-life-insurance-you-need
 https://www.paybima.com/medical-health-insurance-plans-online?
utm_source=google&utm_medium=cpc&utm_campaign=PB_Aggregators_Health_In
surance_Policy_Bazaar_Desktop_BMM&utm_adgroup=Policy_Bazaar_Health_Insur
ance&utm_term=%2Bpolicy%20%2Bbazaar%20%2Bhealth
%20%2Binsurance&utm_network=g&utm_matchtype=b&utm_device=c&utm_place
ment=&utm_content=487241314052&utm_Adposition=&utm_location=9040196&ut
m_Sitelink=&utm_Audience=kwd-
1130104971727&utm_Promotion=&utm_Price=&gclid=Cj0KCQjwsLWDBhCmARI
sAPSL3_3RuBlbRZN8b1Y5FUKyVy4Hwl3m_mcIUFeoSz-
_9h6rj6ISrv9MC0kaAh3aEALw_wcB
 https://www.bajajfinserv.in/exclusions-of-health-insurance-policy

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