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A friend in need is a friend indeed. Insurance, thus act as a friend who comes to rescue when we need it the most. Risk and uncertainty are part of life great adventure, we can suffer from critical disease at any time, house or car can be destroyed because of any natural calamity or accident, there can be premature death of the earning member in the family etc. During these times the family is emotionally upset and if the financial crisis also hits at the same time – it becomes a double whammy. Hence, Insurance help financially at the time of any uncertainty in life and helps individual bring to same standard of living even after the eventuality.
In this article, we have highlighted the 5 insurance policies an individual must have.
Term Insurance: Term insurance is the purest form of insurance. As the name suggests, the policy is in force for a particular term/tenure (say 30 years or up to age of 75) after which the contract comes to an end. During the time the policy is in force, insured pay every year a fixed amount to insurance company called as premium and if during this time the insured dies, the insurance company pays sum assured to the family of the insured. In case the insured survives the period of insurance, the policy terminates, and nothing is payable to the insured. Hence term insurance products offer only risk cover without any returns or any maturity value.
This policy is a must for every earning member of the family. As every individual carry the risk of premature death and if he dies before his retirement, his family will likely to suffer financial stress as there wouldn’t be any regular income coming to family. These policies are relatively very cheaper as compared to traditional insurance products and cater to the specific needs of an individual i.e. to cover the risk of death.
Medical/Health Insurance: Medical advancement and rising medical cost makes mediclaim policy a must for every individual. These policies are one of the most popular and increasing more and more individuals are buying this cover. Health insurance provides cover to fund medical expenses when an insured is hospitalized for more than 24 hours. The expenses normally covered are cost of operation, nursing and doctors’ fees, diagnostic tests, room charges as well as pre and post hospitalization expenses.
Hence, Health insurance provides peace of mind as it helps to reduce financial stress about treatment expenses. Since the insurance covers all the expenses incurred in the hospital (upto the sum assured) insured and family member can focus their energy on getting better treatment and quicker recovery.
Critical Health Insurance: Changing lifestyle, rising expenses, excessive travelling, peer pressure etc all lead to higher level of stress in our daily life. Hence, the chances of any critical diseases like heart attacks, cancer, strokes, etc. which were earlier considered rare, is becoming common day by day in the increasing number of urban Indians. Moreover compared to 10 years back, the incidence of critical illnesses among the younger age group has also increased substantially. Hence this makes the critical insurance cover a must have.
A critical illness policy pays the sum assured if individual is diagnosed with any of the critical illnesses irrespective of whether he is hospitalized and the cost incurred. The critical illness cover is an extension of and not a substitute for the medical insurance cover as medical insurance policy covers only hospitalization expenses while critical illness policy pays the lumpsum amount irrespective of the treatment, hence it help individual to cover extra cost for medical expenses as well as maintain one’s lifestyle during the recuperation period.
Personal Accidental Policies: The life insurance will pay lump sum amount in case of death of the insured but what if an individual meet with an accident and survives but is temporary or permanent disable. In that case he/she may lose his job or business or he/she may not be able to work for a year or so. This instance will lead to loss of income for the family. Hence the accidental policy is a must which pays lump sum amount in the event of death as well as if the insured is disabled – permanent or temporary. While selecting personal accident policy, individual should go for policies which cover all four i.e. death, permanent total disability, temporary total disability and permanent partial disability.
Home Insurance: Every Indian dreams of having his/her own house as it is rightly said that three most important things in life are – Roti, Kapda aur Makaan. We sacrifice or postpone many of our other goals / aspirations to buy our dream home. This is the biggest investment made in our lifetime. Hence protecting our dream home against any uncertainty/unforeseen event should be always on the top of our mind.
Home Insurance protects your home against losses/destruction due to natural or man-made calamities like fire, floods, earthquake, burglary and terrorism. In addition, it also covers your household contents including furniture, durables, clothes, utensils, jewellery, etc against fire, earthquake and burglary. Hence it provides a mental peace to every house owner against any uncertain event which can impact its biggest and most dear investment.
Conclusion: As the uncertainty in today’s world is increasing, an individual should equip and take necessary precaution to safeguard against all these risks. Financial Planning starts from Risk planning as the first step. Thus, all the 5 insurance covers mentioned above are vital from a financial planning perspective.
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