Monday, February 9, 2009


Ensuring one’s future the insurance way.

Those of you who have read my posts on this blog would have figured out that I am not a big fan of traditional insurance plans (Endowment, ULIPs etc) as investment tool. However, just for the record sake let me also state that while I am not too fond of traditional insurance (read endowment etc) plans, I am of the firm opinion that one can NOT afford not to have insurance in his scheme of things. There are quite a few insurance plans which are very useful and a must for each and every one of us .There are few plans which we have to have to ensure that we are not exposed to the vagaries of uncertain life.

Let’s look at 5 such investment plans which in my opinion is a must for every individual worth his salt.
Personal accident insurance is a investment plan which provides cover against any financial damage/liability to the subject/policyholder in case of an accident. This protects the policyholder in case of accidental death or disability . This is particularly recommended for young people below age of 30 years who have just started earning. The reason is that during young age they are less likely to suffer from any disease etc and are exposed mostly to the risk of accidental death or disability. This provides cover against both death and disability due to accident coz disability for younger people is a bigger issue than death itself, financially. Also its one of the cheapest insurance cover available and acts as a good add on to the normal life cover as well.

Term insurance is plain life cover offered at very low premiums. This is recommended for everyone , mostly for people in the age group of 30 and above. This will protect you from any eventuality. Since each one of us has some earning capacity which is expected to continue for some period in future. The sum total of all that is our net value in simple terms i.e if we were to live our life then we would earn that much money. But if something were to happen to us we loose that sum which we would have earned and hence there is financial loss along with the emotional loss with death. To protect this we need to cover ourselves with a term plan. The amount of cover is generally arrived at a concept called Human Life Value concept, but simply one should atleast have term Plan with SA of 10 times his annual earnings as on date. All insurance companies in India offer this.

All of us and our dependents are exposed to the medical risks at all points in time. The cost of medial care is going up with every passing day and the trend is likely to continue. Since medical emergencies can happen anytime to anyone, one needs to be prepared for it. Thus , I recommend everyone to have a floating medical cover for the family. For salaried, generally the employer does it for the employees, but for the others one needs to have it individually . One needs to have at least a floating cover of Rs 5 lakh for the family. Also there are plans where one can have policies to cover critical illnesses like kidney failure, heart bypass surgery etc which are very expensive in nature. These policies are offered by all general insurance companies in India.

Since the idea behind insurance is to cover all our risks which are financial in nature we need to have these covers as well. As you grow and go higher up in the ladder you accumulate assets which are of high ticket size . The replacement cost of these assets are steep and hence not easy to replace them easily. So its advisable to have these assets covered under general insurance plans offered by companies to give you peace of mind.

Though this is not a typical insurance plan, I am discussing this here because in India we have pension plans sold by insurance companies only with partial life cover in it. This is very critical for all those who are not covered by the Govt Pension plan. Most of the Central and State Govt employees are covered under Pension plans run by the organization they work for, but for others there is no such safety net to take care of their expenses after they retire and grow old. Since we all will continue to need money even after retirement its necessary that we plan well in advance for such inflows . Most of the life insurance companies are offering pension plans which will guarantee pension on making small contributions regularly in their plan. I suggest all of you working in companies which don’t provide pension and also Self employed, please go and buy one for yourself .

So , above mentioned are the 5 plans that you need to have if you want to have future which is perfect and devoid of any unpleasant surprises for you and your near and dear ones.

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