Time to run for a cover

Time to run for a cover
Comment E-mail Print Share
First Published: Tue, Nov 25 2008. 11 30 PM IST

Updated: Tue, Nov 25 2008. 11 30 PM IST
With so many serial blasts and terrorist attacks all over the country, there is a sense of insecurity. Uncertainty prevails—be it life or property. And that gives you enough reason to take steps to secure the future, at least financially. To protect yourself from the repercussions of a terrorist strike, you need adequate cover for your life as well as assets. Here’s a list of insurance covers that you must have in these uncertain times.
COVERING YOUR LIFE
The risks that your life carries are death, hospitalization and physical impairment. Accordingly, you need life insurance, health insurance and personal accident cover, respectively, for the risks.
Life insurance: How much life insurance you need depends primarily on the number of dependants you have, and the amount of liability, such as loans, that you carry. It would also depend on estimating how long your dependants would take to start fending for themselves.
Says Pune-based financial planner Veer Sardesai: “Typically, you need to calculate the living expenses of your dependants and multiply the amount by the time period you think they would need the money. This is after you have accounted for all your liabilities.” After arriving at the figure, you need to look for a policy that can give you the required cover at the cheapest possible price. The market offers several plans, ranging from a pure term to investment plans such as a traditional endowment plan and unit-linked insurance plans (Ulips).
Our choice is the term plan, as it works out to be the cheapest and simplest. You just pay for the cover and the policy pays in the event of death.
Also See The Must-have Covers (PDF)
However, the most popular plans in the market right now are Ulips, that expose your money to equities while covering your life. If you are opting for Ulips, you need to read the fine print and carefully compare these before you lock yourself into one. There is still a lack of flexibility in Ulips; they are marred with mis-selling and aren’t the cheapest option.
Health insurance: A standard health insurance policy that takes care of your hospitalization expenses is a must-have. However, do check with your insurer if it provides cover for hospitalization on account of any act of terror. While most insurers cover you against terror attacks, there could be some who don’t. Read the permanent exclusion clause carefully.
If you have health insurance from your employer, you might not have to worry about this clause. Group insurance policies insure risks that individual policies don’t, since they have the option of tailor-made policies with the insurer.
However, it would be prudent to check with your employer too. Other health policies, which have defined benefits such as critical illness and hospital cash benefit, could be bought as top-ups.
Personal accident cover: What this cover offers you is financial compensation against accidents, which might leave you physically handicapped for a period of time. Typically, a personal accident policy covers you against death, permanent disability, permanent partial disability and temporary total disability. For death or permanent disability, it pays you a lump sum compensation. For temporary disability, it pays you a weekly compensation of around 1% of the sum insured for up to two years. This policy offers you a cover of up to 60 times your monthly salary and could go up to 100 times in some cases.
This cover is available with non-life insurers and comes bundled with health insurance too. It can also be opted for as a rider while buying a term plan. However, the riders do not always cover terrorism.
For instance, Reliance Life Insurance does not pay for accidental death claim or permanent and total disablement claim on account of terrorism.
COVERING YOUR ASSETS
Your vehicle and house could be at risk during a terrorist strike.
Motor insurance: For your vehicle, you should go for comprehensive motor insurance. In addition to giving you third party cover, it also pays in the event of personal damage, theft of your car, or injury to the passengers in the vehicle. Third party insurance protects you in case you cause damage to property, or for an accident, or loss of life of a third party.
Householder’s insurance: To protect your house, you need to take a householder’s policy with a terrorism cover which, normally, is an extension of a fire insurance cover. A fire insurance policy covers the building and its assets against fire and allied perils such as earthquakes, lightning, storms, floods and riots.
However, this policy will not cover a fire triggered by an act of terror, unless it is covered for separately. Says T.A. Ramalingam, head (underwriting), Bajaj Allianz General Insurance: “Terrorism cover always comes as an extension with a fire insurance policy in order to establish the risk. Just on account of terrorism, there could be any damage, which is an unspecified risk. Hence, we give it under fire and allied perils.”
The fire insurance cover can be bought at an additional premium of Rs0.08 per thousand of the sum insured under the householder’s policy. Says Neeraj Kumar, general manager, Oriental Insurance Co., “You can buy terrorism cover mid-term also. However, we refuse the cover if there is a developing case of a peril. So, if somebody were to buy a cover because a flood is going to strike, we will not cover him.”
Emotions and mental trauma can’t be insured, but material objects can. The sooner you act, the more soundly you’ll sleep.
The views expressed on this page are not the newspaper’s opinion and are provided for information purposes only by Outlook Money. Readers are requested to do their own research. Neither Mint nor Outlook Moneywill be responsible for any actions and outcomes based on information provided here.
Write to us at outlookmoney@livemint.com
*******
CONNECT
Know
Common online trading problems and solutions
• Delay between filling in an application form and getting a username and password: Approach two or three brokers after assessing their brokerages and checking references with users.
• Ticker not updated: Open NSE and BSE websites
(www.nseindia.com, www.bseindia.com) and verify prices before ordering.
• Online mutual fund redemption: If you buy MFs online, your only option most of the time would be to redeem it online.
• Discrepancies in matters such as tax and brokerage: Always verify your contract note. (Veena Venugopal)
Invest
Investing in foreign equity, whether directly or through mutual funds, does not get the tax benefits on dividend and capital gains that domestic equity investing does. Remember, the dividend earned on such holdings is liable for tax at the rate applicable to the investor, and long-term capital gains are taxed at 20%. You will also be liable for tax under laws prevailing in the country of trade. But this can be set off against the tax liability in India if there is an agreement between the countries to avoid double taxation. (Sunita Abraham)
Do
Some easy steps to help you manage your money if you are in the Armed Forces:
• Get a PAN card.
• Minimize transactions that are offline.
• Open a demat account and trading account with online brokers. Ensure that they offer you offline (over the phone) trading facility too.
• The details of the bank account you give for payouts should be for one that you will not close.
• For SIPs, leave a few signed copies of renewal mandates with a trusted person who can mail these to the fund house, or carry them with you. (Sunil Dhawan)
Buy
India Post, with World Gold Council and Reliance Money, will sell 24-carat gold coins at its post offices. In the pilot phase, the coins will be available for sale in at least 100 India Post outlets in Delhi, Tamil Nadu, Maharashtra and Gujarat. The coins will be available in denominations of 0.5g, 1g, 5g and 8g. The price that you pay for these coins will be competitive and based on the prevailing price of gold. They will have a certification from Switzerland-based gold company Valcambi and come with certification, product standardization, numbering and assayer certification.
Comment E-mail Print Share
First Published: Tue, Nov 25 2008. 11 30 PM IST