Money Guru: What is ‘Use and File’ In Insurance? Expert decodes

Money Guru: India has to do a lot of catching up when it comes to health coverage across the country. Only 3.5% people in India have life insurance. Most investors are confused when it comes to investing in life insurance. 

The confusion has been compounded by changes in health coverage by insurance regulators. 

Recently, the insurance regulator gave its permission to life insurance companies to offer health covers too. In such a situation, the question is whether it is right to take a health cover from a life insurance company? What is 'Use and File' in Insurance? What are its advantages? Expert in Personal Finance matters, Venkatesh Naidu, CEO of Bajaj Capital Insurance Broker explains this in a chat with Zee Business' Swati Raina a popular TV Show Money Guru in Zee Business.

It is right to take health cover from a life insurance company?
Only 3.5% of people in India have life insurance. This shows that the penetration of health insurance is less than 1% in the country. It is expected that if the life insurance company sells health insurance, the scope will increase. At present, there are 2.5 million agents in life insurance companies. It will be beneficial as insurance agents can deliver health insurance from door to door.

What is ‘Use and File’ in Insurance?
In life insurance, 'use and file' means that life insurance companies will be able to launch the product immediately. It would be possible to bring life insurance products without the approval of the regulator. The approval of the regulator will not be necessary before launching the product. However, once the project hits the market, IRDAI will be informed. Also, it will be easy to launch a term plan and return of term insurance.

Whereas 'Use and File' do not include individual pension products. Also, individual savings and annuity products are out of this purview.

What are the advantages of 'Use and File'?
Through 'Use and File', customers will get more options in the life insurance policy. Like - new types of products will come according to the needs of the customers, new innovations like embedded insurance will come in the product, new products will take less time to arrive, and more. It is to be noted that product approval takes 6 months to 1 year.

Insurance to be not sold with SIP
- Mutual Funds products with insurance features will not be sold because SEBI has prohibited AMFI from bringing such products.
- The insurance cover continues till the SIP period. Insurance protection equal to the fixed times of the deposited SIP is available.
- With the increase of the SIP term, the amount of insurance cover will also increase.
- SIP insurers from ICICI Pru, Nippon Ind., ABSL, PGIM.
- Now fund houses cannot sell products with SIP insurance.