Health insurance cover is the most crucial to have especially at this point of time when the entire world is experiencing the wrath of Coronavirus. In the modern era of inflation, it becomes imperative to seek out a decent health insurance cover especially if you wish to safeguard yourself as well as your loved ones from falling prey to skyrocketing healthcare expenses. Apart from providing you with adequate peace of mind, it also offers the best chance of recovering back both physically and financially if anything unfortunate happens.
Getting a health protection as early as possible is becoming extremely important as once you succumb to issues such as diabetes or blood pressure, your insurance cost starts getting high while the coverage gets low. Today we are going to take you through the most important considerations which can help you in choosing the right cover.
The emphasis on importance of having the right and adequate health insurance plan is never enough.
There is always a lot of confusion about which health insurance plan is best and which one suits our needs. The major reason for this confusion is diversity of features among different insurance providers and their products. There are so many things and fine print that one needs to check before buying a health insurance plan.
Let us start with the very basics.
Types of Health plans
So there are two types of health insurance plans available in the market. These are:-
- Indemnity Plans
- Benefit plans
Let us discuss each of these two in detail : –
- Indemnity plans
Indemnity means to make good the loss. The objective of this type of plan is that it makes sure that you do not have to spend on the medical treatments from your own funds. This plan ensures this by two ways :-
- Reimbursement -It reimburses the cost of medical treatment in a hospital. Reimbursement means first you need to pay all the expenses incurred in the hospital and after showing proof of the expenses by way of bills etc, the insurance company reimburses you.
- Cashless treatment – This is the most common one and you might already be aware of this. Here, you don’t have to pay anything from your pocket; the bills of the hospitals are directly paid by the insurance company through TPAs. This facility is available to all the network hospitals of the insurance provider.
I would say almost all the times, the hospital near you will be covered in a list of network hospital and you can avail the cash less facility. However, if not then you can opt for reimbursement. So it is always better to check the list of network hospitals before buying an insurance policy.
For example, if a policyholder chooses a sum insured amount of Rs.4 lakhs and is presented with a hospitalization bill amounting to Rs.1.5 lakhs, the insurance company will pay out Rs.1.5 lakhs to the policyholder. This is what happens in indemnity based plan.
I hope you are now clear with indemnity pans. In short, this plan settles the claim based on your expenses incurred either by reimbursement or cashless. This claim cannot exceed your sum insured. These plans also cover a wide range of treatments and illnesses and cover the actual amount of the hospital bill.
On the other hand, benefit plans pays out a fixed amount to the insured on diagnose of a particular disease for which he is insured irrespective of the expenses incurred or about to incur. This means you can spend this amount received from insurance company however you want and not necessarily the hospital expenses.
When a person is diagnosed with a critical illness, not only he incurs the hospitalization expenses but also suffer by loss of income owing to inability to work. The benefit plans gives you the flexibility to use the money as you want.
For example, if a policyholder chooses a sum insured amount of Rs.4 lakhs and is diagnosed with a critical illness then insurance company pays you the entire sum insured of 4 lakhs. Doctor’s certificate and report is required to prove diagnosis. Now even if the he is presented with a hospitalization bill amounting to Rs.1.5 lakhs, the insurance company will pay out entire Rs.4 lakhs to the policyholder. This is what happens in benefit based plan.
Now based on the above two types, let us see the different types of health insurance plans available in the market:-
- Comprehensive health insurance Plan – It is a Indemnity based plan which is available as individual plan as well as family floater. These are offered by general / health insurance companies only.
- Critical Illness Plan – It is a benefit based plan which is available only for individuals not as family floater. There are some plans which are comprehensive which covers a number of critical illnesses and there are plans which cover only one particular critical illness like cancer. Also, note that these plans are often offered as a rider as well. Thus, it is offered by both life and general insurance companies.
- Corona Specific Plans
IRDAI had recently mandated insurance companies to offer short-term health plans that will cover hospitalisation expenses related to the treatment of COVID-19. This will assist individuals buy specific health cover for meeting hospital costs due to coronavirus.
There are two such plans – Cororna Kavatch and Corona Rakshak. Both of these policies are short term health insurance plans meant for Covid-19 related hospital expenses. One of the major benefit of these policies is that your no claim bonus of existing comprehensive cover will not be impacted due to COVID-19 claims.
- Corona kavatch – It is an indemnity plan offered by general and health insurers only. Minimum cover – 50,000, Maximum Cover -5 lacs. It is available in both individual and family floater Option. You can get to add hospital daily cash of 0.5% of SA per day
- Corona Rakshak – It is a benefit plan offered by both life and general insurers. Minimum cover – 50,000, Maximum Cover -2.5 lacs. It is available as only individual plan. It requires an hospitalization of 72 hours.
It is suggested to not buy corona specific in place of comprehensive cover but rather it should be like a supplementary cover. It is recommended that one should have a comprehensive indemnity based cover with a benefit based cover as well. Both the plans have their own unique features.
Stay safe and be insured.
Someone once asked me, ‘Did you get sold to insurance or did you buy insurance?’. At first I was confused, how can someone get sold to insurance? But after few minutes I understood what he meant. Almost everyone gets sold to insurance.
Another mistake that people often make is, buying insurance from friends and family. Which could be even worse than buying it from an insurance agent. Every time your friend or relative has to reach their target, they’ll know who to approach. You’ll be stuck with paying premiums for policies you may not even want. You are paying those premiums with your hard earned money. You can use that same money elsewhere, and even profit from it. Use your money to work for you, not the other way round.
Insurance has to be bought for the right reasons. It is a very important financial tool and your financial kitty would be incomplete without it. Parents work so hard to make their children’s life easier, so that their children do not have to slog later.
Everything is becoming so expensive, that planning ahead is very important to reach your goals. Specially if you have a lot of people dependent on you. ‘Life is uncertain’ is a fact, no one can change it. So it always better to have your loop holes covered, before you come to that stage. It’s hard enough your family has to suffer the loss of your life, but don’t put a financial burden on them too. Life insurance policies are not only meant for covering the loss of your life but you can also cover the financial loss of any goal too.
Let us now look at some reasons why you need insurance, some of them might even surprise you. Here goes:
1. Basic Cover For Your Financial Loss :
This is one of the most common reasons why you need insurance, to cover your financial loss. Your family will be so devastated at the time of your death, that they will not be able to think straight. This insurance cover will help them get back on their feet and also cover the immediate expenses that come along the way. This way, you can save your family the trouble of not worrying about their financial needs.
2. Tax Benefits:
Some people buy insurance to obtain the tax deductions available to them. The best thing about life insurance is that their maturity claim as well as the death claim are both tax free. Even the premium amount is available for deduction under section 80C. The premium claimed can be, up to a maximum amount of Rs. 150000/-, since that is the limit under section 80C. After having said that, do not buy any insurance just to claim this deduction. If you are going to buy insurance for this reason, then you might as well buy a policy that will attend to your needs.
3. Financing Your Debt:
Now I’m sure you do not want your family to carry the burden of paying off your liabilities. So if you have got your other goals covered through various investments, then get your liabilities covered through insurance. For example, you’ve taken a house loan, and you still have half the amount to pay back, take an insurance cover for that amount, so even if you are not there, your family will have the finances to pay off the loan.
4. Sort Your Education And Retirement:
Life insurance just doesn’t mean insurance for your life only. It also provides cover for your income. For retirement, annuity is a very good option to consider. After investing in an annuity, you will receive a regular income till your survival. So if you haven’t considered this option, I think it’s time you do.
As for your education, there are education plans offered by the insurance companies for your children, so that in case of an unfortunate event, your child’s education will not be compromised in the bargain.
5. Earlier The Cheaper:
The earlier you buy a life insurance cover, the cheaper it is for you. While you are still young, there is a very low chance of you getting diagnosed with various diseases. So it’s always better to take insurance earlier, so you do not have to spend much when it comes to premium payment, it will be affordable.
6. Insure Your Business:
Insurance is a very handy tool if you have a partnership business. You can take insurance on your partner’s life, so that if he/she passes, the company can use that money from the claim to make up for the loss of the deceased partner. The money can also be given to the nominees of the deceased’s family, this way they do not have to give them a share in the company.
7. Regular Income:
Apart from your basic cover, insurance also provides you with regular income. So if the insured passes away, the family members will get the death claim as well as regular income will be provided to the family. This way the family can use the claim for the immediate expenses and the regular income for their monthly expenses.
8. Sometimes It Can Be Too Late:
The famous phrase ‘It’s never too late’, but in insurance, it can be too late. Do you think a person at the age of 55 or 65 or 75 years of age can get an insurance policy easily? No insurance company will take that risk, and even if they do, then the premium amount will be so high, you might not be able to afford it. So don’t wait for it to be too late.
9. Back Up To Fund Long Term Goals:
Now you may think, we have investments for that. But a lot could go wrong with your investments. In this case, we will consider how an insurance policy, can come to your rescue. For example, you are investing through SIP, to achieve a certain goal in say 10 years down the line, after 5 years, you pass due an unfortunate accident. Now from where is your family going to get the funds to continue that SIP, and how will they be able to reach that goal? But if you had an insurance policy, your family can use the death claim amount to continue with the SIPs.
I think these reasons are more than enough to at least think of buying insurance. You may have had bad past experiences with insurance, but now you are aware of the options available to you, which can help you plan accordingly. So if you still have doubts about your choice, then always consult an adviser, they will guide you in making the right choice. So get insured and get that ‘Peace Of Mind’ in return.
Every insured person always have this worry. Everyone remains a little concerned over this. Will the insurer settle my claim as per the policy terms? Is there any hidden condition that can actually prevent me from getting my claim in the right time? Is there any activity or possible loopholes in the process that can negatively affect claim settlement? All these worries and concerns are common.
Here you Read Complete guide on Covid-19 Medical Insurance
Yes, rejection of claims is not rare and you have sufficient reason to be concerned over this. Claim settlement is the most crucial part of a insurance policy that no insured person can take lightly. Let us try to answer all your concerns with a single remark. If you have followed the process as it is required starting from filling out the form with right information to attending medical tests to paying timely premiums and applying for the claim in right time, nothing can obstruct you from getting your claim.
Here we are going to provide 7 most important tips to make your claim settlement smooth and absolutely hassle free. These are the time tested and tried principles that worked for most insured persons around the world in regard to claim settlement.
1. You Should Not Put Full Trust On Insurance Agent
When applying for a insurance policy often we are carried away by the rosy side of the proposed benefits and just forget to ask about all the things on the flip side. This happens particularly when we put too much trust on the insurance agent. While you have to listen to what he has to say about the policy you nevertheless should verify all the statements made by him and read the policy details and form in detail before coming to a decision. Most claims that are rejected are resulted from a hurried decision and forms filled up in haste. Any wrong information or inadequate information can lead to rejection of claim. So, instead of filling up the form in a jiffy just read the fine prints carefully and make sure it is filled up without missing any vital information.
2. Stay Away From Giving Incorrect Information
Insurance company is trusting you as per the information provided by you and promising you an insurance sum as per the policy terms. Naturally, any wrong or inadequate information furnished by you is equal to a breach of trust that can lead to the rejection of claim. It is your duty to furnish all the necessary information to the insurer and in case you do not fulfill this obligation, the company does not have the obligation to pay the claim amount. Naturally, you need to be perfect in your position and provide all correct information asked for.
3. Disclose Your Medical History
In any insurance policy the prime evaluation on the basis of which a proposed sum assured or insurance benefit is determined is the assessment of risk. The medical history of you and your family is crucial to assess the risk involved in insurance policies. This is why disclosing the medical history in detail is so crucial to get your claims at any moment of contingency. From your habit of substance abuse like tobacco or alcohol consumption to any instances of prior medical treatment or diseases, you need to disclose all your health and medical data to the insurer at the time of applying for the insurance coverage.
4. Do Not Avoid Medical Tests
The underwriter in insurance company assess the risk involved in an insurance policy based on the information furnished by the applicant. Now, in certain cases where there is larger risk involved due to higher sum insured value or any possibility of medical risks, the applicant may be summoned for some medical tests as required by the insurer. You have to attend these tests to provide correct and updated health information and help underwriter assess the policy risks.
5. Update Details Of The Nominee To Help Faster Claim Settlement
There are many people who just apply for a life insurance policy for only financial benefits or tax benefits and do not give much thought to the process of claim settlement and the insurance benefits that the beneficiaries can get in case of any contingent situation. Naturally, they carelessly fill up the nominee information without caring much about the credibility of correctness. Remember, at the time of claim settlement the nominee information should match with the original documents provided by the nominee and any dissimilarity or difference in this can lead to delay or rejection of claim. In case the nominee of a policy dies earlier than the insured person, update the information with the insurer and provide a different nominee as applicable.
6. Make Sure That The Policy Is Not Lapsed
Any insurance claim is null and void when the respective policy is lapsed and not in force. This is why to get your claims you need to ensure paying the premiums before due date and keep the policy alive. All insurance companies provide a grace period for paying their premium in case the due date is failed. Only if you cannot pay the premiums within this grace period the policy become lapsed and you fail to get your insurance claim.
7. Fill Insurance Claims At The Earliest
Your family may forget filling up claim forms when going through an emergency situation. Yes, it may not be a priority high on the list but nevertheless you cannot completely avoid this as such negligence can prove costly when it comes to settlement of claims. Even when someone cannot attend such a situation one can always communicate the company through a friend or close one and intimate the insurance company about the same. When you do not make any delay in intimating insurance company, your claim is processed smoothly without least delay.
Life insurance is meant for achieving the financial goals in case of any sudden loss or contingent situation. But to have the full insurance benefits you need to adhere to the norms and provide information as you are asked for.
Many of us people think it is absurd to purchase the life insurance plans at an early stage of life, because you are too young to die and have a whole lot of life to earn and save for the life insurance plans, but truly speaking, the life insurance plans should be bought in the early years of your working life. Even if you go and ask any of the financial planner or advisor, they will also suggest you to go and purchase the life insurance in the early years of your earning.
Owning a life insurance is not a sign that you are near your last days, but it symbolizes your smartness and the ways how wisely you have planned for your family and loved ones even if you are not around to take care of them. Most of the people are unmarried in their early years of the earnings and they do not think that there is any need for the life insurance right now as they have not started off with their family life yet.
But think about it twice, once the family life starts, the responsibilities gets doubled, the expenses increases, the family needs to take some important investment decisions for the settlement of the family or the buying of a new house, or any thoughts about the family planning in the upcoming future years and so on the expenses keeps on increasing.
When do you exactly have the time to save from your mere income from which you serve the family, take care of your dependents and even pay for the mortgage?
When you are the only bread bearer of the family then you need to have a life insurance. The life insurance is the best investment plan to safeguard of the future of your loved ones after something happens to you. You can take care of your family members even when you are not around. The life insurance plans provides the death coverage for any uncertain event. The death coverage helps the family in the times of any financial crisis or provides them the financial strength and stability to carry on with their lives smoothly.
Read here: Complete guide on Covid-19 Medical Insurance
The Younger You Purchase The Life Insurance, The Better It Is
You would not want your family to suffer from the financial problems when you are not around and thus you would definitely want to set aside some amount of money that is more than enough for all the future needs of the family and the uncertain events that may occur in the future. And if you begin saving for your life insurance in the early years of your life then you can save more than others and can also save it very cheaply. As it is always said the younger the merrier.
Here are some of the major reasons which will support you in the purchasing of the life insurance while you are young –
- Health is wealth. It is a known fact that you are much more healthy and energetic in your twenties than you can be in later years, so you can work hard to earn more money and can start your life insurance soon by savings and investing with almost 10% of your total earning. And life insurance companies also rely on the health of the individual at the time of the issuing of the life insurance plans. You are prone to a large amount of premiums if you start your life insurance in later years when you are not as healthy as in your twenties.
- You can get loyalty benefits for being a long term client to the life insurance company. The companies provide lots of loyalty benefits to their clients in order to be competitive in the market. And if you have started off with your life insurance in early twenties, then by the time you are in your fifties, you would have earned a lot of life insurance loyalty benefits.
- Life insurance provides you the cash value. The cash value of the insurance amount is so much important factor. On the basis of the cash value, an individual can take loans and borrow money from the banks. The policy loans need to be taken for any major life events in the future years and thus there is another advantage of having a life insurance early.
- Save you money. It is always said to save your money, but keeping aside the money can reduce its time value and thus life insurance is the best way to invest the savings if you are a conservative investor.
- You can also get various tax benefits. The premiums for the life insurance plans reduce the total taxable amount and thus one can use it to save their income tax as well.
- The younger, the cheaper. This is true for life insurance, as you have a long period of time to save a huge pile of wealth for your loved ones, and you can also do it with cheaper premiums.
So these were the important reasons why you should be insuring yourself in the early years rather than waiting for your mid 40s when premium will be too high.
Life is unpredictable and you never know what is going to come next. You always have to be prepared for the best and the worst. Life insurance is an important tool in protecting a family’s economic well-being if a parent or partner dies.
A life insurance policy is an indenture with an insurance company. In exchange for premium payments, the insurance company supports a lump-sum payment, referred to as a death benefit, to beneficiaries upon the insured’s death.
Life insurance is a very crucial part of one’s financial well-being. Insurance needs to be given preference over investments for any person who has dependants. Thus, this makes life insurance an effective tool to not just save taxes but to also ensure that your family is protected.
Generally, life insurance plan is selected on the basis of the goals and needs of the person. Term life insurance usually provides protection for a set time period, while whole life insurance provides lifetime coverage. It’s imperative to note that the death benefits from all types of life insurance are generally tax-free.
- Tax Saving Deductions For Life Insurance Products Is
Under Section 80C, life insurance premium payments paid up to Rs 1.5 lakh in the name of the taxpayer, taxpayer’s spouse or children are allowed as deduction from the gross taxable income.
Under Section 80C, ULIP investments up to Rs 1.5 lakh are also eligible for the same deduction. ULIPs are unit-linked insurance schemes that provide a mix of equity investments and life insurance.
Life insurance plans should not be considered as an investment. The purpose of life insurance should be to protect one’s family and dependents, not to gain any kind of return from it. That is why term insurance is the best kind of life insurance- it is economical and delivers the fundamental purpose of providing protection. ULIPs (Unit Linked Insurance Plans) are products that support investment as well as insurance. It is suggested that investment and insurance should be handled individually. Preferably, one needs to get life insurance after considering factors like income, expenses, debt, and age.
Insurance is a significant aspect of any sound financial scheme. Different types of insurance help in protecting you and your loved ones in numerous ways against the cost of accidents, disability, illness, and death.
The insurance assessment should be made on the basis of your family and economic condition. There are many types of insurance but unfortunately, no one-size-fits-all policy. For instance, life insurance can be a fundamental necessity, specifically if you have a spouse and children. Disability insurance is important for everyone which delivers an income stream if you are not able to work.
Read here: How Much Life Insurance Do You Really Need?
Apart from life insurance, there are other things as well which needs to be protected. The majority of the people need some amount of all of these types of insurance to choose from.
Let us discuss this.
Classification of Insurances:
- Homeowners Insurance
Homeowners Insurance ought to let you refurbish and rebuild your home after a unavoidable physical destruction or damage and supports in covering the structure of the house and it’s contents. Insurance of at least 80% of your home’s replacement value, sans the financial worth of land and foundation, is essential for you to be obscured for the cost of repairs.
There are many categories of policies, with progressively inclusive coverage and cost. These plans not only protect your house but it’s surroundings as well.
- Auto Insurance
Automobile Insurance protects you from damage to the considerable investment in a car and/or from damage or injury caused by you or someone driving your vehicle. It can help cover costs that you or anyone in your vehicle may incur due to an accident with an uninsured motorist.
Auto liability insurance is obligatory for any individual who has a car. In many states, it is mandatory that you have liability coverage before you register a vehicle. However, the minimum coverage provided by the state is quite meager to provide enough protection. Fire, theft, and collision coverage are advisable for a vehicle having more than marginal value. You can cut back on costs, however, by selecting a higher deductible – the amount of loss should exceed before you get compensated.
The auto insurance cost differs greatly; it depends upon the type of company offering it; your preferred coverage and deductible, where you live, the type of vehicle, and the ages of drivers in the family. Sufficient discounts are often available to safe drivers, non-smokers, and the ones who travel to work via public transportation.
- Liability Insurance
Often referred to as umbrella liability insurance, this applies when the personal liability and lawsuit coverage in other policies gets exhausted.
Life insurance, received when you die, can support a surviving spouse, children, and other dependents; can help maintain their standard of living, can help pay off debt, can help in finding the education costs. The amount you require depends on your situation.
Your financial expert can help you evaluate your needs to determine the types and amounts of insurance that are ideal for you and your family. For instance, term coverage costs less but may remain active for a definite term of years. For lots of families, an arrangement of whole life and term insurance may support for current and future needs.
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It all started from the month of December 2019 that we started witnessing the spread of coronavirus. The contagious viral infection that still doesn’t have any cure as no vaccine is introduced yet has kept us under lockdown for over 100 days now.
Covid-19 positive cases have risen in these past few months but at the same time people are getting recovered too. So that’s something positive we can look forward to. We are living in a world of uncertainties which are increasing day by day.
Millions of people are infected all over the world. During this time, there has been a flood of questions related to medical insurance. I am glad that people are now talking about the need for medical insurance. During such times, it is even more crucial to seriously consider including medical insurance in your financial planning.
Based on my experience and interaction with so many people and their families, I have realised that the ones who are young and healthy do not opt for medical insurance. This is because they feel nothing is going to happen to them. And the ones who have medical conditions find it difficult to get a cost effective and adequate cover.
So the point I would want to make here is getting an adequate health insurance is a preventive measure to protect your finances in case something as unfortunate as corona or any accident happens. It is better you get it early in your life so that you can enjoy more features and better coverage.
Now coming to questions that you might have in your mind regarding the current covid-19 and health insurance plans.
Read here: 7 Reason Why You Should Buy Insurance
Let me answer some frequently asked questions. I have divided these questions in two segments i.e. one for someone who already has taken some health insurance policy and others who do not have any insurance at all till now.
FAQs from people who have medical insurance
Q1 – If I get diagnosed with covid-19, Will my treatment be covered by my insurance company?
Answer: Well, as per IRDA all the health insurance companies offering indemnity based covers are instructed to settle the claim for covid-19 patients on priority. Also, it is important to know that the main features of your health insurance policy remains the same be it covid-19 or any other disease.
Let me brief you about 2 important features of health insurance policies to get better clarity on whether it be covered or not.
- Hospitalisation of 24 hours – This is common ground on which all health insurance policies work. If you get admitted into the hospital for at least 24 hours then only the cost will be covered by your insurance company. Few day care treatment is also covered in most of the policies but it does not apply to coronavirus. So if you are not admitted to the hospital, then you will not get your cost reimbursed.
- Pre and post hospitalisation expenses – Once you get hospitalised, majority of the insurance companies will also cover your pre and post hospitalisation expenses up to 35 and 60 days respectively. This means if you had incurred cost on covid-19 test pre hospitalisation, then that cost will be covered. However, if you are someone who got yourself tested and the report said negative then you cannot claim that expense from your insurance company. In short, diagnostic expenses are not covered by insurance companies unless there is a positive case and it leads to hospitalisation of at least 24 hours.
Q2 – What about expenses incurred for quarantine?
Answer: Based on the above two features, quarantine that does not require hospitalisation and treatment will not be covered.
Q3 – Can insurance company ask for additional premium in my existing policy to cover COVID-19?
Answer: No. As all the current health insurance policies which are indemnity based are already covering the novel coronavirus. You need not pay extra to cover the same. However, if you wish to enhance the sum assured then you will have to pay more premium.
Q4 – One of my friends already had a medical insurance, but still the company rejected the claim. What could be the reason?
Answer: Like I said before, all the features of health insurance policy remains the same. Let us say, if a person would have purchased the health insurance policy just 10 days prior to testing positive for coronavirus then definitely insurance company will not settle the claim. As the general rule, be it corona or any other disease, you cannot file for a claim in first 30 days of the policy purchased.
Q5 – I have a critical illness cover that I purchased 2 years ago. Is COVID-19 covered under this plan?
Answer: No. Existing critical illness covers do not provide cover for Coronavirus.
FAQs from people who do not have any insurance
Q1 – Which policy to buy that covers COVID -19?
Answer: All the health insurance companies offering products which covers covid-19. So study the detailed inclusions and exclusions before buying a health plan for you and your family. Low premium should not be the criteria to select a health plan. Instead look out for maximum coverage and a claim settlement ratio of over 90%.
Q2 – I have heard about standalone health insurance policies. What are those?
Answer: IRDA has instructed all health insurance companies to come up with a standard Benefit Based Covid-19 health insurance product by July 10, 2020. This is mandatory for the companies to offer. The cover ranges from 50,000 to 2.5 lacs with a single premium for 105 days or 195 days or 285 days. As proposed, benefit equal to 100% of the Sum Insured shall be payable on positive diagnosis resulting in hospitalization.
I hope all your questions are answered related to health insurance plans amid COVID-19. I highly recommend to invest in a good health insurance plan providing adequate cover. For the ones, who already have health insurance should check whether the cover is adequate. If not, it is suggested that buy additional cover.
Maintain social distance, wash hands regularly and stay insured!
If your family member or anyone depends on you financially, Insurance is a must have product in your portfolio. When it comes to insurance, there are various types of policies with varied benefits and features.
Which is the most beneficial policy for you?
How much insurance do you need?
These are few questions that need to be answered before buying a life insurance policy. Buying a life insurance policy is important but what is equally important is to buy adequate insurance.
In this article, we will discuss insurance need analysis by thumb rule method which is easy & quick to calculate. Important point to remember while applying thumb rules is the calculation won’t give you the exact insurance amount you should have. But it will definitely give you a fair idea to start with. Exact insurance depends on various factors like age, dependent needs, goals, liabilities etc. Although these thumb rule methods won’t give exact insurance required but with these methods we can calculate minimum insurance required and get ourselves started.
If you would want to know the exact insurance cover required for yourself, you may get in touch with a financial planner. This will help you to get the answer to this question customised to your needs.
Now let us start with these thumb rules.
1.Based on yearly income
The first thumb rule is based on your yearly income. Ideally, a person should be insured to the extent of 12-20 times of his yearly income. Lesser the age higher the multiple. Here Income refers to net income means income left in hand after reducing your taxes and personal expenses. Please note that we are talking about your personal expenses here and not the family expenses.
This is one of the easiest ways to calculate minimum insurance required. For example, a person aged 25 has yearly income of Rs.5 Lacs and spends Rs.50,000 on his personal expenses throughout the year. He then should be insured to the extent of Rs.90 Lacs (Rs.5 Lacs – 50000 =Rs. 4.50 * 20 times).
Read more:- 7 Reason Why You Should Buy Insurance
2.Based on family’s monthly expenses
The second important thumb rule takes into account your expenses. Based on expense method an individual should be insured to the extent of 80 to 120 times of his family monthly expenses. The underlying assumption here is we need to plan for adequate insurance by making provision for their regular expense if we are not there.
For instance, a person’s family monthly expenses are 50,000 then he should at least have an life insurance cover of Rs. 60,00,000. ( 50,000*120)
3.Income plus expenses method
As per this method, a person should be insured by following both methods – i.e.income method and Expense method. It is a combination of income method and expenses method. In the first part, insurance is calculated as per the income method and in the second part, the amount required to pay off all the loans and financial goals are added to the first part.
For e.g. as per first part income method insurance calculated is Rs.50 Lacs and second method other loans and goals totals to Rs. 30Lacs. In that case total insurance needed is Rs.80 Lacs.
4.Affordability of premium as % of your income
An individual has various responsibilities and priorities. Insurance premium is treated as expenses if it’s paid for pure insurance policies. An individual ideally should pay around 6% of monthly income as insurance premium for self-insurance. As more members of the family are insured he can increase this by 1% per person.
Premium paid for savings and investment plan should not be considered, only pure insurance cost is calculated as part of the limit. Many companies follow this thumb rule while buying insurance under group insurance policy for their employees. Now that you are aware of how to calculate the amount of insurance required, you are ready to take the first step. It is suggested that you use these thumb rules as a guiding principle only. They can provide a framework for you to assess your individual needs. To get a more accurate idea of the amount of insurance required, you may get in touch with a financial advisor. Don’t wait and start investing in an adequate insurance cover by downloading the fintoo app.
What do people fear most? It is an uncertainty of life, which makes people worry about their loved ones. So, there must be a solution to this problem, which will at least cover your loved ones financially in case of need or contingency! Yes, there is indeed a solution – insurance. Insurance will help cover the insured and/or the family of the insured. This article will help you understand a few important things like the importance of insurance, how to choose insurance and it will answer the most important thing – how much should be the coverage and why?
Types of insurance which deal with most important aspect of contingency management
- Life insurance: – Life insurance will cover the most uncertain thing in life which is – death. There are again many subtypes under life insurance. There is a term plan which will need the insured to pay a fixed sum for the predetermined time. There is also an endowment policy which will provide survival benefits along with death coverage.
- Health Insurance: – Health insurance provides coverage for the medical emergencies and hence second most important. Most of the employees have group health insurance but it needs to be analyzed and assessed whether your group insurance covers the potential liquidity needs and is optimum or not. If not, then it is time to raise your sum assured which will help you cover the unexpected medical emergencies. It is always suggested to have medical cover over and above the cover provided by the employer.
In this blog, we will focus on Life insurance only.
So let us see how to assess whether you have enough life coverage or not?
- Loan coverage: – Needless to say that we all have some kind of debt burden, be it in form of housing loan or be it in the form of car loan or any other type of debt. Make a list of all such loans and arrive at an approximate figure of total loan repayment. If your total sum assured takes care of this loan liability, you are safe, otherwise, it is time to raise your stake. This will help your family to pay off the debt in case of any unfortunate event.
- Routine expenditure: – This includes basic expenditure like power, rent, grocery expenses, etc. which can’t be avoided and must be incurred for survival. Add up all your sum assured and/or retirement income and factor with the expected inflation rate. If your sum assured could cover this inflated required sum then you don’t need to touch your insurance.
- Lifestyle expenditure: – These are the expenditure which is incurred to maintain a lifestyle. So, this will cover pretty much basic expenditure like vehicle maintenance, second home repairs, renovation expenditure etc. These are the ones which are hard to locate, but if considered at the earliest, even these expenditures are easy to cover.
- Savings to income ratio: – If you save almost around 35% or more of your income, then it is safe to say that you need not invest more in life insurance. For e.g. consider that you have been investing 30% of your income in mutual funds having an approximate rate of return of 10-12%. Also, that you have invested in term insurance which will cover your family in case of death of the insured. In such a case, you need not divert your further income towards the term insurance since your mutual fund investments will take care of it, So you should buy Insurance along with SIP for your betterment.
- Investment goals: – You may wish to marry off your children lavishly or you may be wanting to provide them with the best education. But all of it comes with a cost, and to provide for it your family will need strong financial support. You can easily achieve it by investing in the right kind of insurance. There are many insurance policies which are tailor-made for such events which help you cover these expenses even if you are not there with your loved ones.
Instances when you need to raise insurance coverage
- Getting married: – When you started earning, you may have thought only about yourself and your parents. But, when you get married, you need to think of your spouse also in terms of insurance coverage. You need to add your spouse to your nominee list too.
- Starting a family: – When you hold your new bundle of joy in your hands, the first thing that comes to your mind is about its safety and security. This is another major event when you need to restructure your insurance investment. When a child is born, you need to raise your sum assured to cover the additional expenditure.
- Additional income: – When you earn a promotion or income raise, it is time for you to consider a corresponding increase in sum assured. This will help your family to incur and adapt to the better lifestyle needs even when you are not around.
- Additional loan : – You may invest in a second home or a new car by resorting to loan for the same. But, while you take the loan, you need to think about repayment of the loan when you are not around. If not taken care of, generally this additional asset may be termed as a burden due to loan repayment by the nominee or heirs. To avoid this situation, you need to increase your sum assured to such an extent so that it will cover at least a major part of the loan repayment.
So these were some of the instances where you should be increasing your life insurance cover to keep you adequately insured at all times. You may download the Fintoo App to get a suitable insurance policy for yourself.
The term ‘Life Insurance’ is easy to understand, though it features may be complicated. It all depends on the needs of a person. If a person knows what they’re looking for in an insurance policy, it becomes easy for them to search for one. Insurance is important for everyone because it covers the possibility of a risk occurring.
The reason as to why people end up buying the wrong policy is because they don’t buy it according to their needs. People make their decisions based on other people’s experience. Everybody’s needs are different, so based on that, policies from different life insurance companies should be compared.
The outbreak of the COVID-19 pandemic might have made you realise the importance of having life Insurance but do not make these mistakes while Deciding on an Insurance Policy. Let us discuss these mistakes in detail.
Insurance Is An investment
One of the biggest mistakes, thinking insurance is an investment. People need to know that insurance is to cover their risks. If you want to invest, there are many other avenues where you can invest in, they give you better returns and other benefits as well. Taking a ULIP and an endowment policy just because it has investment, will result in paying high premiums and the maturity or death benefit will not be much also. In many cases, the first question people ask when it comes to insurance is, how much return will I get? In fact the right question is supposed to be ‘How much cover am I going to get?’
No Proper Research
Before buying an insurance policy, do you compare it? Most common answer will be “No”. This is also why they end up with the wrong policy. It is always important to do research before you take a policy. Identify what your needs are and the cover you require. Then once you know your need, pick out the best insurance companies in the market. The next step is to compare the different policies and the policy which suits your needs the best, is your answer. If you do not know how to go about it or if you are not sure of whether what you’ve chosen is right, then seek advice from a financial advisor.
‘THINK’ Insurance Is A Waste Of Money
Almost everyone thinks insurance is a waste of money which is not true. Insurance is a need, especially when there is only one person working in the family. People give excuses like ‘I don’t have money’, ‘premiums are expensive’ and so on. In this case, a term insurance is the best to take, it’s the purest form of insurance and it serves one’s needs and it’s premium is cheap. It’s not a waste of money. It secures your family’s future.
Some people blindly trust the insurance agents, just because their friends or relatives are agents. In the end, they are the ones suffering, because they are paying a premium for a policy that’s not even required by them. That same premium could have been invested somewhere else and they could have got a better return. It’s your hard earned money, so use it wisely. Don’t just blindly buy policies, that will be a waste of money.
Before buying an insurance policy, there’s only one question you need to ask yourself, What is my need? It all comes down to this question. People easily get influenced by others and easily influence others as well. If a policy doesn’t cater to the needs of one person then it does not mean that it will not suit anybody else as well. It is better to do research on one’s own needs, rather than asking others about their policies.
So, now we know where we are going wrong and where we make the major mistakes while choosing insurance policies. If the above points are kept in mind, then the policy you choose will be for your benefit only. You may download the fintoo app to buy insurance plans suited to your needs.
The modern times have seen a whole lot of progress in science and technology. There are newer and improved treatments for critical diseases which were not available earlier. As such, life expectancy has increased. However, one cannot ignore the rising incidence of diseases too.
Modern man is increasingly falling ill with major illnesses because of poor lifestyle. Heart-related ailments, cancer, organ transplants, etc. are victimizing more and more individuals. Against the cases of rising illness, medicine too has become expensive. A simple hospitalization drains you of thousands of rupees and sometimes even lakhs. Imagine if you contract a critical illness. Do you know the costs involved? It will definitely be in lakhs depending upon the disease.
Critical illnesses and their treatments damage your health and your savings. Having a critical illness plan, therefore, becomes necessary. These plans help provide the required funds for managing your critical illness.
You might be thinking that “I already have a health insurance policy, then do I still need a critical illness plan”. Well, it is important to know that your basic health insurance policy does not cover the critical illness. These are usually excluded from your mediclaim. So in case you are diagnosed with critical illness, your health insurance policy will not come to your rescue.
Do you know what such critical illness plans are and how they help?
What are Critical Illness Insurance plans?
Critical illness plans are health insurance plans which pay a lump sum benefit on diagnosis of a critical illness. The plan covers specified illness. When you are diagnosed with any of the covered illnesses, the chosen sum insured is paid immediately.
If you are wondering “Is COVID-19 covered under critical illness plans or not?” Let me clear that COVID-19 is not considered to be a critical illness as per insurance companies. Your normal health insurance covers the coronavirus treatment as per IRDA guidelines.
So what all diseases are covered under critical Illness plans? Let us have a look:-
- Heart Attack
- Multiple Sclerosis
- Major Organ Transplantation
- Kidney failure
These are some of the diseases covered under this plan. The number of diseases covered varies as per plans and insurers. It usually is in the range of 8 to 40. It is suggested that you check the list of critical illnesses covered before buying the plan.
Why do you need one?
As stated earlier, critical illness plans are helpful when you suffer from a critical illness. The reasons why a plan is advised are as follows –
1. It helps in supplementing your health insurance coverage
If you already have a health insurance plan you can avail the coverage for the treatment of your illness. But would the coverage be sufficient? Critical illnesses require extensive treatments and such treatments don’t come cheap. As a result, your health insurance coverage might fall short of meeting the expenses of the illness.
When you have a critical illness plan you get an additional payment on diagnosis of a major illness. This payment helps supplement your health insurance coverage. You can, thus, avail specialized treatments with the additional funds which you get.
2. The plan benefit can be put to any use
Yes, a critical illness insurance plan helps in supplementing your health coverage. But what if you have other expenses to take care of? Where would you get the required funds? From a critical illness plan for sure. The benefit of a critical illness plan is that you receive lump-sum benefit irrespective of expenses incurred. This compensation received can be used anyway. You can use it to avail specialized treatments, for paying off loans, meeting lifestyle expenses or on your recovery. There is no restriction on the fund’s usage. Isn’t it great?
3. You can save taxes too
If the above-mentioned benefits are not enough, you also get the tax advantage when you buy a critical illness plan. The premium which is paid for buying the plan is exempted from tax under Section 80D of the Income Tax Act. The limit is Rs.25,000 which increases to Rs.50,000 if you are a senior citizen.
Types of Critical illness plan
If you are to protect your pockets from the brunt of expenses incurred on critical illnesses, you better equip yourself with a critical illness plan. Even if you have health insurance, invest in a critical illness plan for better protection. You can buy the plan two ways –
- As a rider
- As a standalone plan
A rider is an additional coverage clause which can be added to a basic life or health insurance policy by paying an additional premium. Though riders are good, a standalone plan is better because of the scope of coverage available. Standalone critical illness plans provide better coverage than riders. They cover more illnesses and can be customized too.
So, include a critical illness plan in your portfolio. You would have to part with a couple of thousands in premiums but the benefits far outweigh the cost. In today’s age when diseases are rampant it is better to be financially prepared, isn’t it? You may download the fintoo App and buy a suitable critical illness plan.