Skip to main content

Insurance - One must weigh the pros & cons and be selective

The insurance market is flooded with many policies and schemes. While each has its own benefit, not all are needed.
Insurance is possibly the best financial tool to protect yourself as well as your valuables from unforeseen circumstances. In fact, you owe it to your family to get the best cover you can afford. However, while it pays to be smart about insuring your family and your valuables, it is even wiser to make out which policies are truly worthwhile, and which ones are redundant.

You need to know that while each cover has its own benefits, not all of them are needed in normal circumstances. Also, there are lots of insurance policies that use scare tactics to lure you in, and have premiums that are overpriced. And paying too much for protection can be a financial strain in itself. Therefore, you need to be selective in choice.

Insurance is the best known form of financial protection to guard against major uncertainties or vagaries of nature. As a thumb rule, a person needs to have at least a basic cover to protect himself in the form of personal accident insurance — which is the cheapest cover for self protection or health insurance to cover hospitalization expenses with a minimum sum insured of Rs 1 lakh. Assets like vehicle or home, which may be prized possessions, are also depreciating and as such need adequate protection from risks like accidents or natural perils.

Thus, the insurance that’s worth it typically covers your life, your health, your earning power or the assets you’ve accumulated during your lifetime. Primarily the five main types of insurance everyone should take into account are:

PERSONAL ACCIDENT COVER

It basically covers the risk of accidental death and permanent total disablement, and is a good choice to supplement a life insurance policy. The best part of it is that it is the cheapest cover for self protection and can be taken even by those whose income is low or cannot qualify for life insurance due to medical issues. Personal accident cover is also recommended in the early stages of life when one has just started his/her career and there is no need of insurance cover as the likelihood of death from natural causes is way too low to require a financially unencumbered person to take on life insurance. The more compelling insurance need at that stage is for a personal accident cover which covers the risk of accidental death.

Persons below the age of 40 have a bigger risk from death and disability due to an accident compared to any other risk. Disability for a young person can be a bigger tragedy than death. Personal accident insurance provides an extremely low cost option of covering this risk.

TERM INSURANCE

Once a person crosses 35 years of age, the risk of diseases and ailments starts increasing. The person also becomes more prone to lifestyle diseases. Now it is not uncommon to hear of persons who have died of a heart attack at the age of 30 or 35. Hence it becomes important to cover the risk of death due to reasons other than accident. Term insurance is a no frills, low-cost option to secure financial security for the family, and therefore should preferably be there in everyone’s insurance portfolio.

Every human being has a quantifiable economic value for his dependents. Any amount of loan that a person has taken gets added to this value. Protection of this economic value is very important, especially in India which does not have a strong social security net. A term insurance is the cheapest way to cover oneself for one’s Human Life Value (HLV)

CRITICAL ILLNESS COVER

By opting for this cover, you can insure yourself against the risk of serious illness in much the same way as you insure your car and your house. Under this cover, a guaranteed cash sum is paid if the unexpected happens and someone is diagnosed with a critical illness such as cancer, stroke and kidney failure. The benefit amount is payable once the disease is diagnosed meeting specific criteria and the insured survives 30 days after the diagnosis.

This is, in fact, a very important cover for persons who have crossed 45 years of age. Although a health insurance policy covers hospitalization expenses, critical illness involves a lot of expenditure even when the person is not hospitalised. Expensive medicines and diagnostic tests, regular doctor visits, special diets etc. add up to a lot of money. A critical illness policy provides financial stability by providing upfront money to the insured for all the treatment.

HOME INSURANCE

Your home is not just your most valuable asset, it’s your safe haven from the world outside. However, while your home cocoons you and your family, it’s your responsibility to see that nothing untoward happens to the building and its contents. Therefore, insuring your home is as essential as ensuring that it has strong foundations.

A home insurance policy, also known as householders’ insurance, is the best bet to safeguard your house because it not only covers the structure of your home but also all its valuable contents from different kinds of perils such as earthquake, terrorism, flood, burglary and house-breaking all of us have observed that the weather has become very unpredictable and vicious in the last one decade. The unpredictability of weather, its extremes and increasing crimes in urban areas are reason enough to take this policy.

PENSION PLAN

Retirement need arises when individual reaches such a stage in life when one does not anticipate future inflows and he/she has to provide for a regular inflow out of the money that a person has accumulated. So all your accumulated wealth has to ensure that you go through the golden years of life without any worry. A good retirement plan allows you to accumulate for your golden years in a systematic manner. You could consider single pay/short pay pensions or immediate annuities for such a need. A flexible unit-linked endowment structured with regular partial withdrawals could be suitable for such a need.

Thus, if you are unable to afford all types of insurance, just stick to the basics and you will be fine!

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...

Stock Market Concepts: Derivatives and taxation

DERIVATIVES refer to an instrument, which derives its value from the value of something else — that is, an underlying asset. In India, the derivatives space has traditionally been the playground for large institutional investors who use it for hedging or for speculative activities. However, with time, we have seen a steep augmentation in the per capita income of an average Indian. Consequently, the appetite for investment in alternative instruments has transcended into the need to explore untested territories, and one of the most lucrative of all the available options, is the derivatives. Taxation Of Derivatives: Let's have a sharp overview of how taxability impacts the dealings in futures and options: Futures: Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head "capital gains". Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now