Paying insurance premium in cash? Watch out!
Premium on an insurance policy can be paid in a number of ways; one of the avenues is cash payment. However, you need to be careful while paying premium in cash as to avoid legal violation.
Vyomesh wants to buy an insurance cover for his family. He has come across a policy offering a cover of Rs 5 lakh, with a yearly premium of Rs 60,000 to be paid over 5 years.
Vyomesh finds the premium reasonable and the policy matching his requirements. He lands up at the office of his insurance agent to fill in the necessary form. He carries with him the amount of premium required in cash. But to his surprise the insurance company refuses to accept his payment in cash.
Why will the insurance company not accept cash payment?
There is a restriction imposed on how much amount can be paid in cash. This limit is Rs 50,000; and payment made over this limit has to be made through cheque or draft. Since the premium exceeds Rs 50,000 in Vyomesh’s case, the insurance company refused to accept the amount in cash.
Looking for Insurance Policy – Click Here
Why is the cash payment limited to Rs 50,000?
The cash payment limit is set to control the movement of laundered money. There was a lot of opposition to this move because not many rural people have a bank account to make a payment through cheque. The insurance regulator has, however, maintained the requirement keeping in mind the requirements of the genuine investors.
What should you do to avoid this kind of situation?
Ensure that the investment in the insurance policies comes from a source that can clearly be trailed to the banking system.
What are Vyomesh’s options if he insists on making cash payment?
These are some of the options available for Vyomesh:
1. Choose policies that would be within the cash investment limit, that is, Rs 50,000. Vyomesh could take a cover for say Rs 425,000 wherein the premium payment would be within the permissible limit.
2. Opt for different policies from different insurance companies so the total limit in either of the companies does not exceed Rs 50,000.
Related posts:
Very helpful information.. While insurance companies do allow customers to pay the premium in cash , they shoudl always be wary of that. For instance , carrying cash has an element of danger associated with it. Also there have been cases of agents duping customers after taking the cash.. Also premium paid by cheque etc gets recorded in your bank account as well which will act as point of reference for future…Overall a nice post.