A road accident, an unexpected illness or a loan that you were not able to service could have telling repercussions for you and your family. The beginning of the financial year is the ideal time to assess such risks and get adequate insurance to cover them.
Before you start worrying about the cost, take a look at the insurance portfolio we have created for you. The numbers we have worked out show that the cost of covering all your risks is a fraction of your income. It could change marginally, depending on your age and the risks involved (see ‘Protection costs’). To appreciate it fully, you also need to understand that insurance is not a savings vehicle but a shield against a financial disaster.
Here’s a list of insurance covers you must have, in order of importance. However, remember not to buy them all in the same month or you stand to be overburdened in that particular month each year.
Here’s a list of covers that you should take to protect your family, health and assets. The list includes the amount of cover you should ideally take and the total cost. The premiums are based on the assumption that the policyholder is 35 years old, has a 30-year-old spouse and two kids below six years. We also assume that he earns Rs10 lakh a year and has a home loan worth Rs30 lakh for 20 years. In this case, the total cost comes to 5% of his total income. We also give you a worksheet alongside in which you can fill in your data to calculate your total outgo.
A health plan not only covers medical emergencies, it also makes sure that they don’t dent your savings for retirement or your children’s education. Health plans are available under six broad categories—individual health plan, family floater, senior citizen plan, critical illness plan, daily hospital cash policy and unit-linked health plan (health Ulip).
To start with, you should go for an individual health plan or family floater policy. Take a cover even if you are covered under your employer’s group health cover. Take a family floater to cover your spouse and kids as well. Make sure that children above 25 are covered under a separate individual health plan.
Buying a health plan will ensure that your savings remain on course, but if you die prematurely, all your planning could be derailed. Go for term plans if you are looking at protecting your dependants against a financial crisis. They are the cheapest way to insure your family’s financial liabilities. If you have a home loan, go for a separate term plan to cover it.
Personal accident plan
Many of us already have a health and a term plan but few have an accident policy, though not a day passes without newspapers and channels carrying reports of accidents across the country. An accident could render a person temporarily or permanently disabled, and perhaps seriously impair his ability to earn a livelihood. A personal accident insurance policy would protect your finances in case such a mishap occurs. These policies cover one or more of four contingencies in the event of an accident—death, permanent total disability, permanent partial disability and temporary total disability.
Critical illness plan
This is an add-on to a basic health cover. It takes care of your needs if you are afflicted by a serious ailment such as cancer and pays the entire sum insured on claim. It is available as a rider along with life insurance policies, or as a stand-alone policy from non-life insurers.
After your health and life come your assets, an important one being your vehicle. In this category, however, you don’t have a choice. You can’t drive your vehicle out of the showroom without taking third-party insurance, which covers injuries to a third person, or damage to his assets. But it is better to go for comprehensive motor insurance.
If your car breaks down in the middle of a deserted area or in the dead of night, a car helpline can be useful. These provide round-the-clock on-road services for cars at about Rs365 a year. However, this facility is not available in all cities.
A house is one of the biggest assets for most Indians. Home insurance covers the structure of your house against unpredictable events such as a terrorist attack or an earthquake. It also protects your valuable personal property, such as consumer durables and jewellery. You can either opt for a stand-alone fire insurance policy, or a more inclusive householder package policy.
Credit card cover
Credit cards are easy to carry and come in handy during an emergency—that’s why they are so commonly used today. However, they also run the risk of misuse or fraud in case they fall in the wrong hands.
A comprehensive card protection service in the event of card loss, theft and related fraud is in the offing. Cppindia.com has entered a tie-up with all card issuers under which protection will be provided against any case of fraud if it is reported within 24 hours. Losses incurred seven days before and after you report the loss of your card will be covered, up to a certain limit.
Design your insurance portfolio based on your financial goals and risk-taking ability, but do review it from time to time.
Debit or credit of local cheques can be done on the same day
Now you won’t have to wait two-three days before your local cheque gets cleared. In a recent notification, the Reserve Bank of India has said credit or debit of local cheques should be done on the day the cheque has been deposited, or within an hour of commencement of business on the next working day. The banking regulator has also specified a time frame for the collection of cheques drawn on a bank in a state capital, major cities and other locations—seven, 10 and 14 days, respectively.
What to do if you can’t pay your tax on time
If you miss the 31 July deadline for filing your income-tax returns, you have two options. If there is no pending tax to be paid, you may file your return without paying any penalty by 31 March. However, if you still have to pay tax and you miss the deadline, you will have to pay a monthly rental if you file your return by 31 March. If you cross that deadline too, you will have to pay a penalty of Rs5,000 along with the monthly penal interest. In case you are entitled to a refund, interest on it will be given to you only from the date of filing the return.
Buy health insurance
Are you a senior citizen who doesn’t have any hope of buying a regular health insurance policy? If you are under 65, you aren’t too old to get one some time from now. The Insurance Regulatory and Development Authority (Irda) has asked general insurance companies to keep 65 years as the maximum entry age for a health insurance policy. No insurer will be able to refuse an older person cover or load him with extra premium without providing a valid reason for doing so. Such reasons should stand the scrutiny of reasonableness and fairness, according to Irda.
Investing in mutual funds made easy
Using the various facilities offered by fund houses can not only make mutual fund (MF) investing easier but also more profitable. You can take advantage of three tools
Trigger: With a trigger, you can specify an exit target (a value or time) at the time of investing in a scheme or later. The moment this target is reached, the trigger gets activated, units are sold and you get back your money.
Online investing: The first transaction is still on paper and through a cheque. Once units are allotted, you can open an online account and transact on the MF’s website.
Email and ECS: You can receive account statements by email. You can also receive dividends and maturity amounts directly in your bank account by subscribing to the electronic clearing service (ECS).
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