Jargon buster : What is FREE COVER LIMIT?

[Harish Rawat]

Free Cover Limit (No evidence Limit/ Automatic Acceptance Limit) -

Free cover limit is a limit on insurance cover to an individual member. Up to this limit, no evidence of health is required. This limit is determined by the insurer based on the characteristics of the group.

[Harish Rawat]

Just to add -
Free Cover limit, also referred to as Non-Medical Limit, is set by the Insurance Company providing the Cover. It refers to the threshold, which, if not exceeded by a member’s Death Benefit, the member is accepted into the Scheme without medical examination.

[Harish Rawat]

Scheme consisting of 20 members
18 members each with sum Insured = 50000
2 members with sum insured = 200000
Average Sum Insured = 65000
Calculated FCL = 2X 65000 =130000

Underwrite the top two lives for 70000 each

Scheme consisting of 300 members
297 members each with sum Insured = 50000
3 members with sum insured = 300000
Average Sum Insured = 52500
Calculated FCL = 2X 52500 = 315000

Prudent to Underwrite top three lives by setting FCL at lower level