How does CPI linked increase in Base Sum Insured (SI) works?
04 May, 2021 by Kautilya Bhardwaj
I've seen this optional additional rider with some of the health insurance policies. I'm curious to know how does this thing works, especially (but not limited to) regarding the following points -
- For e.g., if I added this rider to my policy of 10L sum insured, & CPI comes out to be ~5% for the year in 10K INR. Now, the next year's SI will be 10,50,000/- as per this rider & as every year due to my age and several other reasons my premium of 10K will be (say) 11K for 10L policy. Now, as the base SI has increased, will I have to pay more than the expected 11K for my policy, maybe, 11.5K?
- If the answer to the above question is no, will it impact the cost of the rider next year?
- CPI as we know compounds. How will it affect my premium in a longer-term horizon, maybe in the next 10/20/50 years?
- Regardless of the answers above, is this a wise decision to opt for this rider provided that if I opt to increase the base SI anytime next year the added SI will be considered as a new policy, and all TnC like PED will be applicable as a new policy to the added SI.
- If the answer to the above question is no, why?