Photo: Mint
Photo: Mint

Five covers to have in your portfolio to welcome goddess Lakshmi

  • Experts say you should have a cover equal to at least 12-15 times your annual expenses or 8-10 times your annual income
  • Having a personal accident cover will compensate for the loss of income in case you are physically disabled or require complete rest for a certain time period

If you are planning to put your money life in order this Diwali to welcome goddess Lakshmi, don’t forget to secure yourself and your family through insurance. Here are five covers you must have. If you don’t, add them to your portfolio this Diwali.

Life

If you have financial dependants, it’s important to insure your life. The best way to do that is to buy a pure term cover, which is the cheapest in the market because it only charges the cost of insurance. If you die during the tenure, your nominee gets the sum assured; if you survive the term, you get nothing back. Experts suggest you should have a cover equal to at least 12-15 times your annual expenses or 8-10 times your annual income.

Ensure your family doesn’t deal with a crunch repaying your liabilities by insuring your big-ticket loans as well.

Health

With skyrocketing hospitalization costs, buying sufficient health insurance is a must. Start with buying a basic indemnity policy that pays for your hospital bills and also reimburses for the expenses incurred before and after hospitalization. Taking into account the average cost of medical procedures, having a sum insured of 5-6 lakh is a good starting point.

Next, consider buying a defined benefit plan such as a critical illness policy, which pays a lump sum if you’re diagnosed with specific critical illnesses, for which treatment costs are usually high.

Personal accident

You can never foresee an accident but you can be financially prepared to meet the costs that come with the treatment. Having a personal accident cover will compensate for the loss of income in case you are physically disabled or require complete rest for a certain time period.

Personal accident policy consists of four covers that insure you against death, permanent disability, permanent partial disability and temporary total disability. The percentage of payouts for the four conditions varies and is mentioned in the policy documents.

The premiums depend on how risky your job is.

Home

A householder’s insurance is a comprehensive policy that covers all the contents of your house as well as the building. It is advisable to buy this policy even if you live in a rented house because it covers things as basic as damages caused due to a fire accident. At a time when climate change is affecting the world, having a home insurance will secure your house financially in case of events such as flood, earthquake and so on.

Opt for a reinstatement policy that covers the cost of restoring the damaged portion of your house and the contents. This policy also insures the contents against burglary, theft, electrical or mechanical breakdown.

Motor

With the latest amendments to the Motor Vehicles Act, not having third-party motor insurance would mean paying a huge penalty, but this policy pays for damages caused to the third party only. It’s advisable to opt for a comprehensive policy that covers your liability towards the third party as well as pays for damages to your car and the people travelling in it in case of someone’s death.

Note that insurers don’t pay the cost of replacing certain parts of your vehicle but only the depreciated value. A depreciation cover, which can be taken as a rider, pays the remainder.

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