Insurance cover is a key aspect of one's investments and portfolio. There are several types of insurance covers available in the market, ranging from life to health to property. Each of these covers is for a specific reason, and many of them are required at various stages of one’s portfolio creation. Let us look at some of the most important type of covers available in the market.
Life Cover - The amount of life insurance that one has will determine the quality of life that one’s loved ones will enjoy post one’s time. Ideally, one's life insurance should be sufficient to cover the living expenses of one's family in the style that they are used to for a substantial period of time, your life insurance (in the case of premature death) should be able to support at least most of this lifestyle for them for a minimum of 7-10 years (if not more). One should ideally take the optimum life cover early on, since although it is possible to upgrade the insurance to a higher amount, this is subjective and is not as easy as it sounds. If for any reason you are unable to upgrade your insurance later, one can always look at getting another life policy to add on to the existing policy.
Vehicle Cover - Since vehicle insurance is mandated by law, most people stop understating the full information while taking the basic policy. This is unlikely to benefit them in the long run, especially if an accident damage costs more than one can afford to pay out. It is better to find out details on the full coverage policies available and compare these to the potential costs of bearing expenses at a later date. Our advice is to get a full coverage and save hassles later on. Factors such as the price, age, use, mileage, etc. of your car play an important role in deciding the premiums. Other factors to keep in mind are one’s credit history, driving record, past insurance claim record, etc.
Health Cover - This is one of the most crucial investments that anyone can make, especially since health costs continue to grow at a rapid pace and are a significant financial risk that one needs to address. Apart from the likelihood of illnesses, factors such as unforeseen expenses (especially medical) and varying cash flows, is likely to take a huge chunk out of one’s savings. Even a 2-3 days hospitalization can burn a hole in ones pocket at time when one cannot afford it.
While some of the regular aspects such as premiums, deductibles, copay, etc. will have to be considered, there are also other lesser known areas that one has to check for before purchasing a health insurance. One of the key areas that one should analyze is the hospital network, as more the number of member hospitals the better it is. Also, always check on the conditions - some covers include medicine, doctor’s fees, and a stipend during recovery period; other cover only the hospital costs. One should also ideally opt for family floater plans, which as the name suggests covers one’s entire family in the medical insurance, thereby saving a lot of money and hassle in the event of any unforeseen illness.
Critical illness plan - This can be simply explained as, an insurance plan that will payout a lump sum if the person insured contracts any major illness. This typically covers critical illnesses such as cancer, heart attack, kidney failure, coronary artery bypass, Sand major organ failure, loss of speech / hearing / sight, and paralysis. The critical illness plan compensates in some form as a replacement for the income lost due to the illness. However, there are a few aspects to be kept in mind, such as when taken as a separate policy, it offers a more comprehensive cover. Also, most insurers have a survival period, meaning that the person insured has to live for a minimum period (typically 30 - 90 days) post the diagnosis of the illness to be able to claim benefits under this insurance scheme. There might also be a waiting period of up to 48 months for pre-existing illnesses, before these will be covered by the insurance. It is important to check two aspects of the critical insurance plan, viz. the illnesses covered, and the sum assured.
Home & Fire Insurance - Another very important cover is the home insurance, which typically can be taken by both home owners and home renters. This normally covers aspects such as damage due to natural disasters, fires; protection against theft; sub-protection for your electronics, jewelry, etc. This helps cover the cost of any unforeseen event - and since for most people their houses are their most expensive asset, any damage to the property is liable to cause significant financial damage as well. It is advisable to go in for this cover irrespective of if you are renting the property or if you own it.
Travel insurance - This offers various types of coverage to insure oneself against the risk faced as a traveler. One can purchase this from insurance companies, travel agents, tour operators, rental companies, or even travel assistance companies. The coverage, cost, and terms vary widely depending upon the policy purchased.
One should consider the following while purchasing a travel insurance:
a) Trip cancellation insurance - which protect you from the risk of cancellation of trip due to unforeseen events, such as the financial failure of the airline or travel agency, bad weather, illness or death.
b) Temporary health policies - which provide short-term supplemental health insurance coverage. This type of coverage may be helpful when traveling abroad, since some health insurance providers do not have coverage while traveling overseas, and any sort of treatment while traveling abroad could cost you a fortune.
c) Baggage insurance - reimburses you if your personal belongings are lost, stolen, or damaged in travel.
d) Accidental death and dismemberment (AD&D) insurance - compensates you in the event of an accident and you are handicapped as a result or it compensates your beneficiary if you die in an accident.
(Contributed by Anil Rego, CEO of Right Horizons)
