Because of the lifestyle that we lead nowadays, most of us fall prey to different kinds of diseases such as heart attacks, strokes and hernia which require hospitalization for an extensive period of time. At the same time, the cost of hospitalization has also increased because of more expensive treatments. Your financial planning for a year can be complicated if you incur a sudden medical expenditure.

To ease your financial burden in case of a health emergency, health insurance policies are floated by both private and public insurance players. From a cover of Rs 50,000 to one of Rs 5 lakhs or more is available under a health insurance plan. Often called a mediclaim policy, you can not only insure yourself but also your spouse, children and parents even. There are a lot of benefits offered on health insurance plans, which have been discussed below:

1.     Cashless Hospitalization

If a medical emergency strikes you in the middle of the night, such as an accident or a heart attack, you can get admitted to a hospital near you even if you do not have the money to pay for admittance. A health insurance policy offers cashless hospitalization where the company will bear all the expenses incurred, right from the moment you check yourself in. Not only does a mediclaim policy offer cashless hospitalization within your own city but also over the country. A list of selected hospitals shall be provided to you when you buy the policy.

2.     Covering Day Care Procedures

A health insurance policy covers not only serious illnesses and accidents but also trivial day procedures such as cataract and dental surgery. The pre-requisite for availing coverage from your health insurance plan is to be admitted in the hospital.

3.     Tax Benefits

A health insurance policy is important not only for the cover offered on medical expenses but also for the tax benefits. The premium payable for a health insurance policy is deductible from your gross income in a financial year under Section 80D


4.     Cover for Pre and Post Hospitalization

A lot of processes such as a bypass surgery require you to take certain precautions before and after the surgery. For example, before and after the surgery you may have to undergo an angiography or EKG. The medical insurance company would take care of the bills incurred from these procedures.

5.     Securing the health of your Family

A health insurance policy is not only beneficial for yourself but also your family because covers are offered for spouses and children and even parents. In case an emergency arises in your absence, your family can still be treated cashless if they are covered in the health insurance policy. It would certainly unburden your family from the financial responsibilities.

A health insurance policy is automatically renewed every year and the ceiling is expanded too. For example, if you have not claimed the insurance in a year, then the cover may be expanded without you having to buy a new policy all over again. Health insurance plans cover critical illnesses too which require a lot of costly treatments. The premium payable for a plan depends on the age and health status of the individual/group being covered under it.  

Traditionally, car insurance rates in India have not been affected by a person's credit history. It is more prevalent in countries like the United States (although some states do not allow it). Credit scores in India are maintained by credit rating companies such as CIBIL and used, in India, mostly by banks during a loan approval process or by credit card companies to approve issuing a credit card.

The idea behind credit scoring is to assess the creditworthiness of an individual i.e. to see if they can repay borrowed amounts on time and in fullness. Similar to the risks that lenders bear while disbursing credit to companies and big ticket borrowers, retail lending to high-risk  individuals to fund their personal needs can lead to a lot of bad debts on the books of the lender. Credit scores or credit history enables lenders to prevent such situations and retain healthy business.

In India, auto insurance is under the regulation of the IRDA (Insurance Regulatory and Development Authority). Auto insurance is compulsory and without third party liability coverage, it is illegal to drive your car around. This is to ensure that you are able to pay for damages you cause to someone else, in case of an accident. Insurance rates for third party coverage are set by the IRDA. Insurance is also available to cover against damage caused to yourself/vehicle in an accident. The rates for this kind of coverage is set by the insurance companies. Alternatively, you can cover yourself at one go against both third party and own damages by taking out a comprehensive cover. Insurance companies charge premiums by factoring in details about the vehicle and the driver. However, rates that are set by the insurance companies have to be submitted to the IRDA.

Common factors that are studied by companies in India to set insurance rates are:

Make of the vehicle, capacity, place of registration and other information as registered with the authorities, the vehicle's tax and fitness proofs, car fittings etc., Insured Declared Value (IDV), the validity of the driver's license, his/her age, professional background, gender etc. Companies are also interested in the driver's past regarding insurance, claims made etc. Besides these factors, the companies own terms like discounts/bonuses/service tax and other charges affect the cost of insurance.

Although credit history of an individual doesn't figure in strongly at the moment in the Indian auto insurance market, it may well be included somewhere down the road given the idea behind its usage in countries with more developed markets like the US.

The reason U.S. insurance companies check an individual's credit report is because studies have shown that there is a link between the credit history of a person and the possibility of them filing claims on their auto insurance. The higher the chances of the insured filing claims. the higher the risk to the insurer in terms of higher pay-outs. Studies have shown that people with a track record of making late payments, missing out on payments and other negatives in their credit report are riskier on road. Accordingly, companies feel they should charge such individuals higher to be covered under their policy.

It may appear disheartening to be scrutinized this way but, on a positive note, it also indicates that those who have a great credit history are likely to be less risky on road. In this case, they should not have to pay for the same amount of risk as a less careful motorist. In accordance, they are charged lower for insurance as they pose less of a risk to the insurance company.

However, using a person's credit history is not necessarily a good indicator because there are various factors that affect the credit rating of an individual. For e.g. past unemployment or personal emergencies may have caused a fund shortage due to which there was a drop in credit standing. Also, those who are economically well-off tend to have better credit than those who are in the lower brackets which creates a bias against them by causing them to be charged higher when taking out auto insurance.

In India, many individuals are not fully aware of the importance of maintaining good credit scores and there are large sections of society who are still not aware of the existence, much less the use, of these scores. The insurance market as well is still in a developing phase and yet to reach its full potential in terms of penetration and depth in the market. Adopting credit scores to arrive at car insurance rates, though a possibility, will require more understanding and effective reasoning to be implemented; not to mention proper regulations governing the methods for usage.

Credit scoring may be an influence on car insurance rates but it is worthy to note that it is not the only, nor the most important factor. Those looking to be insured will always have to focus on the imperatives of safe driving, affordability, vehicle maintenance and documentation. And with the growing competition in the car insurance market, negotiation is still the best tool to arrive at the best rates for you car.