What are the insurance policies you must necessarily have ? Life has its own surprises. You are hale and hearty one day and can drop dead the very next day; you could land up on the surgeon’s table for no fault of yours; you could be diagnosed with a critical illness rendering you incapable of income generation. I could paint a very sordid picture of all the ill things that can happen to you but then I risk the chance of you closing this browser window. So lets talk about how you can safeguard yourself against some eventualities through insurance.
Insurance helps you to either transfer or lessen the risk that were to arise in the case of any eventuality. We look at 3 such insurances which everyone must have.
Term Insurance
This is one of the first insurance policies you should buy. It’s meant to provide a lump-sum amount to your near and dear ones in the case of your sudden demise. If you die, your family will not get the income you used to bring home. With no income, your family will not be able to meet any of their future dreams for eg,- that of educating kids and getting them married off. The lump-sum is meant to meet such dreams.
Term insurance is the cheapest form of insurance. If you survive the term, you do not get any maturity benefit. If you die, a payout is handed over to your family. There are other variants to getting your life covered namely, buying an insurance with return of premium, or purchasing a ULIP or even an endowment plan. Avoid taking these as these mix investments and insurance. Insurance is meant to protect or minimize the risk of an eventuality and should not be used as a tool to generate money for the long term. So go for term insurance and avoid the rest.
Health Insurance (Mediclaim)
Mediclaim or health insurance is a policy that will cover you for the expenses you incur when you get hospitalized for more than 24 hours (there are some exceptions to this as well). Health care costs in India are rising by more than 20% every year. If you do not have a health insurance policy, a hospitalization could dwindle your finances significantly. Health insurers are ready to help you with a cover to share your hospitalization expense burden. So make the most of it.
Health insurance policies come in many variants. There are simple policies which cover hospitalization expenses; others will cover you for critical illnesses and some cover daily hospital cash benefits. Whichever variant you go with, make sure you either take a standalone individual health policy or a family floater covering all members of your family. This should be taken over and above your employer provided cover. A job change and a simultaneous hospitalization could make you look silly.
Accident Insurance
As the name itself suggests, accident insurance covers you for bodily injuries which arise due to accidents – to be more specific it covers death, permanent total disability, permanent partial disability and temporary total disability that arise due to accidents. So while your health insurance covers you for hospitalization expense, an accident policy goes a step further to protect your income in the case of disability due to an accident.
Accidents don’t come with a calendar – they can happen anytime. Should you be confined to your bed or the hospital i.e. become disable, you cannot earn. An accident insurance policy pays out an amount depending on what type of injury you have received and whether it is covered in the policy. The money so received compensates for the income that the individual could have earned had he not met with the accident and were working.
Last Word
Buy any of these policies through your insurance agent or online, if available. You can get these as a standalone policy or as a rider to life insurance policies. Make sure you read the policy wordings in each of these and understand the exclusions, what is covered and when and how much the payout will be. Most of the nasty surprises and shocks for investors have been around their inability to understand what the policies were going to offer in the first place. So do your homework first.
Is there a scenario when an individual will not need any of these policies at all ?
Good writeup, agree with you on these as they are must have. I’ve 2 of them, and heard somewhere the accident policy from public insurers are good (new india, oriental etc.). Any accidental/permanent disability policy name in your mind? Pls share.
– Jagbir
@Jagbir, I think any accident insurance policy that meets your needs is good. I think the debate on whether to go for public insurers or private ones is subjective. I have taken TATA AIG’s Accident Guard. The others which can be considered are United India’s , HDFC ERGO’s (Accident Protection Plan), Royal Sundaram or ICICI Lombard. The thumbrule says that the cover should be 100 times your monthly salary.
For eg, if your monthly salary is Rs 5,000 per month, the cover should be Rs 5 lakh. In your absence, the family can invest this amount to earn income.
Why is critical illness not considered as a policy which one must have ? I think it should be included.
@Shilpi, I would agree with you and suggest it as a policy which is must have as well. Good thought !
Hello RadheySharma,
Fore mostly ,I wish you a Happy and Prosperous Diwali.
I am 25 and unmarried.Can you please suggest me good Mediclaim plans?
Is there any policy that takes care of both accidental insurance and Mediclaim(that includes my parents if possible) also?Can you suggest me some insurance plans for all the 3 types?
Thanks and Regards,
Ravi Shankar Kota
@Ravi Shankar Kota, Ravi, it is advised to take accidental and mediclaim (which is same as health insurance) separately.
For accidental, please look at TATA AIG Accident Guard.
For health, please take a family floater that covers your parents too and later in which you can include you spouse and children. There are many family floaters available in India – you need to choose one which meets what you ask for. I do not know what your ask is here, hence I cannot advise of any in particular. Check with you financial planner.
As for Term Insurance, take ICICIPru’s online iProtect or Kotak Preferred term plan (this is not online) as these are the cheapest.
If you still need advise, we can chat.
@TheWealthWisher,
Hello RadheySharma,
Please suggest some good flamily folaters that covers health needs of Me and my parents.
I need a insurance plan that provides returns after maturity and also
supports my family in case of my absence.(before and after me benefits)
Hi, better u go for term insurance plan, though it doesnt give any maturity benefit, but u can get it with a very low premium, other money which u were supposed to invest in insurance, u can invest in MFs and other debt funds also.Suppose, you need insurance cover for 2500000, u need to pay 30 to 35000 monthly for the insurance policy which is having maturity benefit, but if u go for term plan, it comes with around 5000 rs yearly. Rest money u can invest in some schemes which are giving u better returns than insurance cos.insurance companies gv u just 5 to 6 % returns on maturity.
Exactly Neelam, how I wish all investors have the same clarity like you. Way to go.
Thanks for sharing the detailed content about insurance here.
Hello RadheySharma,
i am 25 and unmarried ,can you please suggest me a good investment plan
that will help me assure 9 to 10 lacs in 5 to 6 years ,my current capacity of investment is 15k per month.
i also does not have much knowledge of different investment options
available in market so can you please suggest any reading tutorial
that can help me understand financial market.
i will be much grateful to you
@vishal, Use our calculators to find out how much per month is needed first. Invest is some good equity diversified fund. You can read the blog on this website to understand. Is there anything you are looking for specifically.
Thanks Radhey for mentioning the importance of crucial policies. Would it be possible for you to publish the claim settlement ratio of various companies under these insurances? The claim settlement ratio is an important factor to choose a policy, it will surely help the readers.
@Vivek K, Did this in October 2011 –
https://www.thewealthwisher.com/2011/10/10/life-insurance-death-claim/
I know IRDA has come out with the new figures. Will get to it sometime.
@Radhey Sharma, Are these figures claim ratio for life insurance only or it covers all insurances like accidental, critical illness etc.?
@Vivek K, Life insurance only.
@Radhey Sharma, I might be asking too much but when you get to the latest life insurance figures, can we also get figures for other insurances as well? 🙂
@Vivek K, I do Vivek. You are an important reader for me 🙂
I tried to google and search the latest figures but could find the data only for 2009-10 which Radhey has already covered.
Definitely, these 3 are the must haves for a peaceful (financially) life.
Just researched about the ones you have suggested above for accident insurance. United India & ICICI Lombard doesn’t insure more than 10L & 25L respectively (which is little less for anybody who earns more than 25k monthly-as per your thumbrule:cover should be 100 times our monthly salary); TATA AIG & HDFC ERGO insure upto 1CR & 75L respectively which is quite sufficient.
HDFC ERGO’s features are Accident Death Permanent + Total Disablement + Temporary Total Disablement (Maximum upto 52 weeks) + Broken Bones + Last Rites, whereas TATA AIG’s features are quite uncommon like Educational allowance for children, Repatriation of remains, Modification allowance (for house/vehicle) etc. Premium for TATA AIG’s Accident Guard is comparatively less than HDFC ERGO’s Accident Protection Plan.
So the question is can the private players be trusted who lure everybody with their unusual features & high coverage? If the claim & previous info provided to the company is genuine will they settle the claim asap without any hassle?
@Sudip D, It’s difficult to trust any company when it comes to retrieve money from them, after all they are in the business to make money. I think one should be mentally prepared to fight with them. Moreover IRDA is there to keep these companies on their toes.
What one should do – Prepare for the worst and hope for the best. 🙂
@Vivek K, I agree with Vivek here.
The insurers will pay the money, there is no doubt about that but they might make us run for it.
They won’t pay up so easily.
I like TATA AIG.
Also, you forgot about weekly benefits in the above information.
@Radhey Sharma, Radhey, I have seen a few people in this forum praising TATA AIG, could you please share why you like them so that it can help readers?
I am looking for accidental insurance and was considering Bajaj Allianz as well, any views on Bajaj insurance?
@Vivek K, Ah, nothing much there. My interaction with their support staff has been good soI have a good impression of them.
You can go with any as long as it suits you, nothing against Baja Allianz.
@Vivek K, 🙂 so true!
The private companies shouldn’t be inhuman specially at such a time when the nominee/policy holder is already suffering from the loss/accident of his/her loved one.
IRDA must take some strict measures in this regard.
@Sudip D, Well Sudip you are right from customer’s point of view but you need to look at it from business angle as well. The companies are here to do business and make profits. I agree companies should be sensitive in these matters but “business with ethics” is a rare breed in today’s world and it is true for any business. Unfortunately the insurance business has a lot to deal with human emotions and hence it faces majority of criticism.
@Vivek K, Hmm.. true.
The insurance companies yield adequate profit through millions of people. Out of millions if ONLY few hundreds of them claim then the companies should be more considerate & less inhuman in settling the claims. This is exactly where IRDA should take measures.
@Sudip,
Only the big players are in profit, all the new insurance companies which started few years back have yet to recover its losses. It make take another couple of years till they break-even.
@Sudip D, To be honest, IRDA has been doing the right things to tutor the insurers.
They are doing the right things. It is the insurers who make the mess everytime.
@Sudip D, There is no end to greed, is there? Remember we discussed about maximum (un)imaginable profit for real estate? I guess that’s applicable here too :).
As far as IRDA is concerned I have heard that they take customer complaints very seriously and take insurance companies for a ride if the complaint is genuine.
What I feel is most of the time insurance buyers themselves are a bit careless while buying insurance. They don’t disclose the facts properly and simply sign the form where agents tells them to. They don’t tell about the other insurances they have taken, which they should. They hide some medical conditions deliberately or if agent tells them “not required sir, it is a small thing”.
So, all in all a buyer should honestly disclose all the facts as per the guidelines and avoid any shortcuts while buying insurance. This reduces the chance of getting a claim rejected significantly. Let us not give any excuse to the insurance companies to take us for a ride.
@Vivek K, Completely agree!
@Vivek K, Very well said Vivek. When it comes to making profits, no one cares about your loss.
@Sudip D, Try telling them in person !
It’s all about money honey !
They care less then. You can always fight them in court.
@Sudip D, This goes for any insurance – you need to trust them as long as you fill in the right piece of information in the forms that you fill.
Note that no one will give you the money so easily so you will still need to fight for it.
Thanks for this detailed information, this is really appreciated.
@Vivek,
Bajaj Allianz is also good so is the health policy from Apollo. I had shortlisted them both but never took one. Have to start over again and buy one this year.
@Rakesh, If you are taking about MediClaim the best in the industry are MaxBupa and Apollo Munich.
@Radhey,
I was referring to Accident Insurance. The premiums are very high for MaxBuppa, i am happy with National Insurance. With them for over 5 years and they promptly settled my claims too.
Rakesh
@Rakesh, Ah, the premiums for MaXBupa and Apollo Munich are usually higher.
The timing of Manish couldn’t be any better in writing this article. Have a read of this article and see how insurance companies will try to cheat you and how you can fight back: –
http://www.jagoinvestor.com/2012/02/how-two-readers-got-justice-and-got-their-money-back.html
P.S. This is exactly why I stay away from ICICI. In my eyes they have the worst reputation in the market.
@Vivek K, Great. Good these 2 people have been successful to settle their disputes through the jagoinvestor’s owner.
ICICI neither have respect from their customers nor from the employees(came to know it through one of my close friend who used to work for ICICI Pru as RM).
@Vivek,
Good one, finally justice was done, poor lady had to go through a lot of trouble.
nicely put, the blog made me read most of it.
nice effort and i am benefited too..
Thanks
Glad you liked it Sudheer.