BackInsurance covers for peaceful festival celebrations
If you have these five essential covers, you needn't worry
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With festivals lined up on the calendar and wintry months at the doorstep, the festive season has kicked off and celebrations have kicked in. Asking you to think about insurance now may look like a spoiler, but wouldn’t you want complete peace of mind when you enjoy this season of festivities? All we ask is a review of your insurance policies. If you have these five essential covers, you needn’t worry. But if you don’t, please take some time off from your celebrations and buy them.
Life insurance
If you are the breadwinner and your spouse, kids or parents depend on you financially then life insurance is a must. Pick up a term plan, it only includes the cost of insurance and therefore is the cheapest form of life insurance. If you die during the term, your nominees get the sum assured but if you survive the term, you get nothing back. Ideally you should have a life cover or sum assured equal to 12-15 times your annual expenses or 8-10 times your annual income. Also make sure that big ticket loans such as a home loan are insured. Consider buying a term plan online; it is cheaper and since you don’t depend on an agent you will know exactly what you have bought.
Health insurance
Health insurance is a must for all members of a family. The first health insurance policy should be a basic plan that pays for hospitalization. It’s also called an indemnity policy. There are two ways of buying this policy. You could either buy it individually for each member of the family or buy a floater policy. A floater policy considers the entire family as one unit. This means if one member uses the policy, the cover on the others will reduce by that much. Floater policy usually works cheaper for a younger family but you run the risk of underinsuring. You need to buy sufficient cover.
“Floater gives more flexibility in case of expensive hospitalization and is more economical. Ideally a family should have around 10 lakh of floater cover. Serious illness such as cardiac or cancer treatment can cost upwards of 5 lakh and there is medical inflation also to factor in," says Kapil Mehta, managing director and principal officer, SecureNow Insurance Broker Pvt. Ltd.
You can supplement your health insurance needs with defined benefit plans. Go for a critical illness plan or a major surgical plan that covers maximum illnesses or surgeries.
Personal accident cover
A personal accident cover offers you financial compensation if you meet with an accident that leaves you permanently or temporarily crippled. This policy comes with four covers: death, permanent disability, permanent partial disability and temporary total disability. For death or permanent disability, it pays you lump sum compensation which is typically 100% of the sum assured. For permanent partial disability, it pays a portion of the sum assured and for temporary disability it pays a weekly compensation usually up to 104 weeks. “Personal accident is one of the most important covers to have and also one of the cheapest. Anybody can buy this policy for up to 10 lakh but for a higher cover we will need income proof to rule out fraud. Usually insurers would give up to 50 lakh–1 crore of cover," says K.K. Mishra, chief executive officer, Tata AIG General Insurance Co. Ltd.
Make sure your policy has all the four covers. Personal accident cover that comes bundled with a credit card or other financial instruments usually doesn’t offer all the benefits. “Then there is fine print. For instance with some cards, the policy will be payable only if the credit card is used in the last three months," says Mishra.
Householder’s insurance
Comprehensive householder’s insurance or a householder’s package policy is a must if you own a house and live in it. Even if you live in a rented place, you need to insure household goods.
A householder’s policy protects your home from unpredictable events. The basic fire insurance in the policy covers financial losses due to damage to your house and its contents on account of fire and other allied perils such as earthquake, lightening, storm, floods and riots.
Opt for a reinstatement cover that will cover the cost of reinstating the damaged portion of your house and the contents. The householder’s policy also insures the contents against burglary, theft, electrical or mechanical breakdown.
Car insurance
If you own a vehicle then you would definitely have this insurance policy. Even though the third party, it pays for damages to a third party, is the only mandatory cover, insurers offer a comprehensive cover that not only covers your liability towards a third party but also pays for damages to your car and to the passengers in case of death.
The structure and benefits of a comprehensive policy usually stays the same, but insurers have started offering interesting riders that you should look at. “Customers should definitely consider three riders: depreciation cover, return to invoice and insurance for the car engine. There are many riders and for high-end cars one could opt for more riders, but these three riders are essential," says Mishra. Insurers don’t pay the cost for replacing certain parts of your vehicle but only the depreciated value.
A depreciation cover pays the remainder. Return-to-invoice cover applies the same logic but to the car as a whole. Engine protection covers the cost of repairing the engine that gets damaged, for instance, in floods.
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