In Simple terms, Insurances protect you from any financial losses that occur suddenly without your knowledge.
Basic insurances to be in place for every individual are-
1. Life Insurance
Life insurance compensates for the financial loss that occurs to a family due to the death of a person. Human life cannot be evaluated and the loss of a person cannot be compensated but the financial loss that occurs due to the loss of that person can be evaluated and compensated. Life insurance on the bread earners of the family is much important because, after the sudden demise of the person, the amount claimed in the life insurance policy helps them financially.
Types of Life insurance policies-
Term insurance: These are pure Vanilla life insurance policies that cover an individual. The premiums are comparatively low when compared to other products.
Endowment policies: These are types of savings policies. Sum insured in these policies are usually low and premiums are high for high coverage.
ULIP: These policies are linked to the market. Part amount of the premium paid by the policyholder is invested in the stock market. The value of the policy depends on the market value of the funds or stocks the insurance company has invested in. The sum insured in these policies is usually low.
Points to be considered while taking the Life insurance policy:
· Coverage: The sum insured must cover the monthly expenses of a family in the coming years if a person dies today, all liabilities have to be covered along with the children’s education and their primary goals.
· Do not link insurance and investments: Pure term insurance is to opt for while taking life insurance without using it as an investment tool.
Note: If a person doesn’t have any dependents, life insurance is not required.
2. Health Insurance
Health insurance is the most important type of insurance which offers coverage to the policyholder for medical expenses in case of health emergency. It covers different expenses including surgery costs, critical illness, hospitalization expenses, etc.
Types of Health insurance policies-
Individual Insurance: covers an individual where the policyholder can claim the total cover
Family Floater Plan: It acts as an umbrella coverage for the entire family. Sum insured is equally divided among the members covered in the policy. The benefit under this policy is premiums are comparatively lesser than individual policies
Group Mediclaim: This policy is popular among medium or large-scale enterprises provided by employers. Employees and their dependents are covered under this policy.
Points to be considered while taking the health insurance policy:
- Coverage: Healthy single persons require less coverage than those with families, elder people, or persons with critical health issues.
- Exclusion of specified diseases: Some specific diseases are excluded till 1/2/4 years from the policy in which case the policyholder cannot claim the expenses if the expenses are due to that specified diseases mentioned in the policy. These specified diseases will be different from company to company.
- Premium: For the basic health insurance policy the premium will be less and is directly proportional to the coverage. Any other additional benefits like OPD expenses, health check-ups, worldwide coverage, etc will increase the premium
Note: Health insurance is mandatory for all individuals.