Insurance: What Seafarers Need to Know Before Purchasing
Insurance is a contract between an insurance company (or insurer) and an individual, where the company agrees to insure a specific risk for the individual in exchange for a small sum of money called a premium. Every word in this sentence is important, and the explanation will be based on this. Generally, there are two types of insurance: life insurance and general insurance.
Life insurance includes plans like indemnity insurance, gift insurance, universal life insurance (ULIP), and term life insurance.
Non-life insurance plans include health insurance, critical illness insurance, vehicle insurance, travel insurance, home insurance, and many more.
Insurance plans come into being with the sole purpose of supporting an individual or a business in case of an emergency. The amount demanded by the insurance company is called the “premium”. This premium depends on the risk assessment done by the insured or the insurance company. If an emergency occurs, the insurance company will pay the promised amount; otherwise, the insurance plan will lapse after the agreed period (regardless of how long it is).
Life insurance was a huge success until the insurance companies realized that their business was not growing enough. So, they launched some schemes that gave back some amount to the insured at the maturity of the plan, but in return, they charged exorbitant premiums. This is where the exploitation of the ignorant masses began. They hired experts, developed a branch of mathematics called “Actuarial Science,” and came up with various methods to collect the highest premiums from the public while providing the lowest returns.
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Gradually, people were misled into thinking that buying insurance was also an investment. In India, since 1960, some insurance companies have been peddling big lies by selling insurance plans that charged the policyholders much more than what they actually earned. The words on the policies were so precise that only an experienced lawyer could read them.
Furthermore, the meaning of the word “sum assured” also changed. Insurance agents tried to convince people that it did not refer to the sum assured but to the amount they would get at the end of the policy period. Thus, the concept of lifetime risk protection disappeared.
Unit Linked Insurance Plans (ULIP): These schemes have again brought huge financial torture and fraud to the helpless investors. Approximately 35% of the premium was deducted as an expense, which was actually a commission paid to the agents. These plans are vague, have very limited risk coverage, and a fixed portion of the premium is invested in the stock market through mutual funds.
End of Service Insurance
This is a product that most people need and should buy, even sailors. It is available in multiple countries under various names. The details of this insurance are as follows:
For a small premium, the policyholder gets high-risk coverage and can stay insured for a long time (up to 75 years).
If the policyholder survives the policy term (i.e., the period for which the annual premium is paid), no compensation will be paid. In the event of the policyholder’s death, the insurance proceeds will be paid to his or her beneficiary.
What should a seafarer do?
Before your first sea voyage, buy a seasonal insurance policy of around INR 1 crore (approximately USD 170,000). The premiums are incredibly low for this age group (21-22 years old). In some cases, the insurance company will ask for proof of salary as the insurance amount depends on your earning capacity. If you’re going to sea for the first time, you can buy insurance as soon as your salary is paid.
In the initial months, you can ask your parents to pay for the premiums, and they will also feel obliged to do so as their insurance is for their benefit. It could be differentiated according to the country.
Once you start earning money on board, consider purchasing temporary medical insurance to alleviate concerns about emergencies in your home country, where you may not be able to obtain coverage. You can also choose a critical illness insurance, which can be purchased separately or as a supplement to medical or term insurance. This insurance is very useful if you have a family history of critical illnesses such as heart disease, diabetes, cancer, etc. It is affordable when purchased as an add-on, and payouts are available immediately upon diagnosis.
If you are buying a new house or moving into a new house after starting a family, you should buy home insurance to protect against natural disasters and theft. As mentioned above, these policies are affordable because of the high level of coverage they provide.
