National Insurance Awareness Day 2020: In the wake of COVID-19 outbreak, insurance has become one of the most important financial tools to have for the worst times
National Insurance Awareness Day 2020: In the wake of COVID-19 outbreak, insurance has become one of the most important financial tools to have for the worst times. People’s view regarding insurance is now changing and more individuals are increasing the insurance portion of their financial portfolios. The sudden curiosity of financial security of the family towards an unexpected contingency has also gained impetus.
Although the concept of insurance in India is not new, the sudden need for the same has been visible now. However, buying an insurance policy should be guided by an informed decision. On the eve of the National Insurance Awareness Day 2020, Dhirendra Mahyavanshi, Co-Founder, Turtlemint (an InsurTech Company), shares with FE Online 10 things to check before buying an insurance policy:
1 – The “right” product
There is no one-size-fit-all kind of right insurance product. Each one needs to assess his coverage requirement and then opt for the same.
Some ground rules: Term insurance policy is a must-have for almost everyone. This is like your Plan B and provides financial security to your family in your absence.
Secondly, a super-comprehensive health insurance plan is non-negotiator. Medical expenses, treatments and hospitalisation have become too expensive to afford and, God forbid, if a medical emergency strikes, you need armour to save you from the attack of the medical expenses.
Other important products that one surely must consider:
A critical illness plan can help provide financial assistance in case of a critical or terminal ailment. This plan can be taken along with your comprehensive health insurance plan!
A comprehensive Motor Insurance Plan for your vehicle
Home Insurance Plan, especially if you have a new property with expensive fitments so that it protects against possible damages and theft
2 – Suitable coverage level
A coverage level is a very personal concept. It depends on your lifestyle, costs, expenses, etc. Like for Life Insurance, you must opt for a minimum coverage of 10 times your Annual Income whereas for Health Insurance, you need to consider your average hospital bill for a 3 to 5-day kind of stay and then assess the coverage requirement.
Pro Tip: The higher the sum insured, the better it is, so that the insurance requirement need not be assessed and re-assessed again and again! The coverage level should be sufficient to cover the loss that you would face if a contingency strike.
3 – Justifiable Premium
The optimal coverage benefits with the justifiable premium in the affordability parameter need to be weighed, as this is not a one-time purchase!
4 – Family coverage
Family coverage is particularly relevant in a health insurance plan so that their medical costs do not burn a hole in the pocket as well!
Pro Tip: Buy a family floater policy with extended coverage for all your family members and by declaring every possible information especially about pre-existing ailments so that it doesn’t backfire at the time when it is most needed!
5 – Optimal coverage benefits
To make an insurance policy comprehensive (life, health, motor, home, etc.), besides an optimal coverage level, the coverage benefits need to be chosen with care.
Pro Tip: Health Insurance must be as all-inclusive as possible. Life Insurance needs to have a high sum assured, at least for the bread earner and motor insurance plans need to have a zero-depreciation add-on benefit!
6 – Add-on
Most insurance plans offer multiple add-ons. Opt for the necessary add-ons or riders and make your policy customized and comprehensive.
7 – Avail premium discounts
Some insurance plans offer premium discounts like a no-claim bonus for motor insurance renewal, health benefits in health insurance plans, etc. which make the premiums lighter on your pockets. Avail these discounts to get the best premium rate!
8 – Check the insurer’s CSR
Claim Settlement Ratio (CSR) shows the percentage of claims settled by the insurer against the total claims made on it. A high ratio indicates that the insurer honours most of its claims and is favourable. So, when buying insurance, choose the insurer with the highest CSR so that the probability of your claims is high.
9 – Understand the tax implication
Life and health insurance policies allow you tax benefits under different Sections of the Income Tax Act, 1961. When buying these policies, understand the benefits available so that you can reduce the overall tax liability.
10 – The final 3-fold trick
Compare and buy. Disclose all information. Renew on time
There are hundreds of insurance policies available in the market. Choosing the best among the rest requires comparison.