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It's not even two weeks into the year 2012, but many of your New Year resolutions might have died a natural death by now. But if your insurance resolutions are still alive, be a little more careful in the next two months, otherwise, they may also add to the list of the withered ones soon. This is because you are likely to be swamped by calls from insurance companies and intermediaries exhorting you to buy various insurance products, thanks to the tax-saving season that would end on March 31.
Surprisingly, when it comes to insurance, even the most well-informed persons often fall for grandiose sales pitch from insurance advisors and regret their decision later. However, you can make a difference this year and resolve to shed such habits and make a fresh attempt to put your finances in order by sticking to some simple rules.
Plan As Per Your Life Stage
Like any other financial product, age, dependents, short-term and long-term goals should play a key role in determining the suitability of any life policy. The policy you choose would depend on your age and situation in life. If you are looking at life cover and are single with no dependents, you should consider a term policy. Later, once you are married and have kids, you can move on to buying child insurance plans to arrange for education funds. Simultaneously, one also needs to plan for one's retirement and hence can look at pension plans. Your future earning capacity and current net worth should also influence the sum assured.
Tap The Net For Big Savings
Since the last couple of years, many life insurers have launched pure protection covers that can be bought only through the internet. The USP is that they cost just half of what the offline term plans do. Earlier, only three life insurers offered term plans online. Now, this number has gone up to 11. This is the best way to buy a term policy as a . 1-crore cover can cost just . 10,000 a year
Fortify Protection Portfolio
Very often, accidental death and disability covers are offered as rider benefits along with many life insurance policies. Opting for such covers is critical to provide comprehensive financial protection for your dependents in the event of your death. Such covers are also available as standalone policies.
Buy A Health Cover
While those who are young without responsibilities can afford not to buy a life cover, but a health policy is simply indispensable. Buying an insurance policy early ensures that the insurer will cover all illness, as there are likely to be no exclusions if you are in good health at a young age. Further, you can accumulate bonus sum insured of up to 50% of the basic sum insured on account of no claims in most insurance policies.
Those with dependents can consider family floater options. You would also do well to assess your sum assured every year to ensure that it is adequate to take care of medical costs that keep going up.
Compare Key Features
At the time of choosing or porting a health policy, ensure that you carry out a thorough comparison of products in the market. "Run a check on renewability clause, exclusions and the waiting period while evaluating the products. Policies with lifelong renewability, fewer sub-limits and exclusions and shorter waiting period for covering preexisting illnesses should be preferred. "Once you shortlist products that offer similar features, you can move on to comparing the premiums.
Consider New Policies
Unlike a couple of years ago, when all health policies followed a template when it came to offerings; today, several innovative ones have hit the market. While buying a health policy this year, you should consider the new products — those offering large covers for the entire family, life-long renewability, restoration of sum assured in case of unrelated illnesses and so on.
What You Shouldn't Do
Avoid Last-Minute Purchases
You should strictly avoid buying a life insurance policy only to save tax. After all, you need to service the premiums year after year and should you skip these payments, the policy could get terminated, leaving you with nominal corpus. Also, steer clear of buying one through your friend, relative or the boss' wife just to oblige them. It entails a long-term commitment, so stay away if you don't really need it.
Do Not Ignore MFs
While Ulips and pension Ulips are highly popular, it would also make sense to consider other products available in the market before zeroing in on one. If wealth creation is your objective, you can evaluate equity-linked savings schemes (ELSS), diversified equity funds and balanced funds. If your goal is creating a neat retirement corpus, you can consider PPF first, as it offers 8% per annum tax-free returns. NPS is another option that can be looked at.
Do Not Outsource Information-Sharing
One of the key reasons for claim rejection – for life as well as health policies – is non-disclosure of vital information. Often, the tendency is to leave the task of entering such details to agents, who may not be acquainted with your health history, so ensure that you fill the form yourself. Don't buy an insurance policy by providing incorrect information or by suppressing some material information. Your claim can be repudiated later. This will also help you understand terms and conditions of the policies.
Do Not Skip Renewals
Indemnity-based health insurance plans, which are typically sold by general insurers, necessitate annual renewals. So, don't forget to renew the same, lest you are deprived of continuation of the cover. Also, never assume that the policy you are renewing carries exactly the same terms as the expiring policy, as insurers may make small changes. So check the terms and conditions at every renewal.
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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
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Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
- HDFC TaxSaver
- ICICI Prudential Tax Plan
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- SBI Magnum Tax Gain Scheme 1993
- Sundaram Tax Saver
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