Buying a Life Insurance Policy

This is a very appropriate commercial from Religare Life Insurance . I have spoken to lot of my friends and i find that in most cases , they have no idea what kind of Insurance policy they have and they also have very weird reasons for buying, like

• The Insurance agent was a family friend and so i bought this policy
• I was spending too much , so thought of buying this Insurance policy as a saving
• I had to save taxes and did not know any other way to save taxes

Let me ask you a very simple question "Lets say , if tomorrow, you ( earning member ) are no more , would your family ( Spouse, Kids, Parents ) who survive you , be able to make a living based on your today's savings and Insurance claim amount of your insurance policy"

If your answer to this is "Yes" , then you do not have to read further , if your answer is "No" then do read further.

How can a Insurance for say 2,5 or 6 lakhs really help your family that you leave behind, to survive , as these are too small a amount for them to spend a life time on .

Let me take the analogy of a vehicle insurance , when we buy a vehicle insurance , we do so as something that would help us in an emergency and not as a saving tool and i would be glad at the end of the year , if i did not have to use it , but i make sure that i renew it for the next year.

We would have to take a Life Insurance with the same mindset . Only kind of Life insurance policy that would be useful is a Term Insurance Plan or Pure Insurance Plan . These type of Insurance Plan do not give you any returns , but for a small premium per year would give you huge life insurance cover.

No Insurance agent would ever recommend a Term Insurance Plan or Pure Insurance Plan to you as the commission on these type of plans are the least .

So remember that it very important to have Big Life Cover or Sum Insured , as that is what would help your loved family in case of a unexpected event and help your family not only to make a decent living but also see to it that your kids get uncompromised good education they deserve

If you would like to know more about different kind of Life Insurance Policies , click here

You can even buy couple these term plans online

• iProtect
• iTerm

you could probably buy a insurance cover of 1 crore for a yearly premium of Rs.15,000 for a person in his mid thirties., that is how cheap term plans are .

Type of Life Insurance Covers

Traditional life insurance plans : - Traditional life insurance plans make sure that the investments made by the policy holders are not exposed to equities

Unit Linked Insurance plans (ULIPs) : - Allows for the investments made by the policyholders to get exposed to equities

Different Traditional life insurance plans

Whole Life Plan :
As the name suggests, a Whole Life Policy is an insurance cover against death, irrespective of when it happens. Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family. So the insurer

Endowment Plan:
In an Endowment Policy, the sum assured is payable even if the insured survives the policy term.

If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured just as any other pure risk cover. If the person covered remains alive beyond the tenure of the policy, he gets back the sum assured with some other investment benefits.

There is a term for the policy , say 20 years , which denotes the premium paying period

The Insurer gets the amount in one lump sum at the end of the term or in case of death.

Money Back Plan:
A portion of the sum assured is payable at regular intervals. On survival, the remainder of the sum assured is paid. In case of death, the full sum assured is paid to the insured.

The Insurer gets the amount once every few years , as per the policy document, say every five years.

Term Plan:
A term insurance policy is a pure risk cover for a specified period of time. What this means is that the sum assured is payable only if the policyholder dies within the policy term.
 
Source: http://insurance.kotak.com
Image : FreeDigitalPhotos.net,Photographer: jscreationzs

Personal Accident Policy

A personal accident policy not only protects your family in the event of an accidental death much like a life insurance policy, but also covers disablement leading to loss of earning capacity, at low premiums.

You can plan to have a Personal Accident Policy in combination with your Term Plan for a Life cover , what must be noted is that premium amounts for Personal Accident Policy are much lower then the Term Plan premiums ( Term Plans are the cheapest Life insurance covers )

A Personal Accident Policy covers various kind of accident disabilities and may also have a clause to pay the insured person a fixed amount for every non-working day, due to a accident

The premium of a Personal Accident policy is usually decided by the age of the person and more importantly by his occupation , which are categoried based on risk of meeting with an accident, on job.

These are the different types of disabilities covered :
Death,Permanent Total Disablement,Permanent Partial Disablement,Temporary Total Disablement and also loss of limb and eyes .

What must be noted is that , there are many Insurers especially private insurers who do not cover "Temporary Total Disablement ", this is serious draw back .

In case of "Temporary Total Disablement " the level of disability reflects an injury that has rendered the person completely unable to perform any job on a temporary basis. But the person is expected to make a full recovery and return to work.

So if you are buying a Personal Accident policy make sure that "Temporary Total Disablement ", is covered.

Image : FreeDigitalPhotos.net,Photographer: renjith krishnan

Voluntary Deductible in Auto Insurance

Everybody who has a Auto Insurance knows that , they would never try to make a insurance claim in case there is small damage to the vehicle either to avoid the lengthy claim process or to make sure they get the No Claim Bonus


Ideally this mindset can be used to lower your premium amount .

When buying a Auto Insurance , do tell the agent that you would like to increase the "Voluntary Deductible" .

Voluntary Deductible: is that portion of any claim, which the insured( that is YOU ) is willing to pay out of his pocket. The standard rule is, the higher the deductible, the lower the premium.

Example:
Suppose there is a damage to your vehicle and if it going to cost you two thousand five hundred to fix it , you may never make a claim . So when you buy a Auto Insurance you make sure to mention that you would want your policy to mention that Voluntary Deductible on your policy is two thousand five hundred rupees . This would mean even if the damage is larger , you would need to foot the first two thousand five hundred rupees of the bill and rest would be borne by the insurer as per the policy document.

It is just that since you are willing to bear a part of risk of an accident , the Insurance company reduces the premium

Image : FreeDigitalPhotos.net,Photographer: graur razvan ionut

Super Topup

Image : FreeDigitalPhotos.net,Photographer: jscreationzs
As a salaried employee ,one of dilemmas we face regarding medical Insurance is , "I have a medical cover provided for, by my employer , which is pretty decent , then do I really again need to buy a medical cover on my own ? "

Consider these situations in life
1) You intend to take a sabbatical , go back to school , as you feel this extra knowledge would help you in the long run , so you quit and go back to school

2) You intend to change jobs and for first time you realise that you will be able to take a break before joing your new employer , but after you have been relieved from your previous employer

3) You were on maternity leave and as days went by , you realised your little bundle of joy means a lot more to you then returning back to work and decide to stay back at home .

4) You retire ( buying a new health insurance policy at this age is not only very costly , but many pre exisiting diseases will be excluded )

In all these circumstances there would be a time , when you will suddenly find that you are not under the medical cover of any employer and in case you are hospitalised during these times , you would have to foot the medical bills on your own .

My recommendation would be , you need to have a medical Insurance on your own irrespective of employer cover . Buy a normal mediclaim cover for about 2-3 lakh and then by a "Super Topup medical cover" from United India Insurance

Top-up medical insurances , as the name suggests are a type of medical cover , which would kick in over and above someother insurance cover .

For example you may have bought a medical cover for 2-3 lakh , this would be your normal medical insurance , now also buy a Topup medical cover , which would cover any expenses above the 3 lakh limit .
The advantage with topup policies is that since they kick in late( that is after 3 lakhs of expense ) , they are cheaper. You could buy a cover which would kick in from 3 lakh and cover you upto 7 lakh ( that would mean a total cover of 10 Lakh ) for about Rs. 2500 per year for the Toup cover

These medical insurance premiums are tax deductibles over above the 1 lakh limit , hence making them still cheaper to buy .

Check these links on Medical Insurance
Super-Topup - A Super Idea
Do not buy Family Floaters

Super Top Up for Health Insurance

Here is another article on Health Insurance. Apart from the usual medical insurance , popularly called Mediclaim , we have another new product in the market , which could be a ideal way to increase your cover http://www.apnainsurance.com/health-insurance-india/super-top-up.html
Especially those of us who already have medical insurance , either bought by our self or provided through our employer this is good way to enhance the amount of cover . And as earlier I would recommend that you buy a individual policy , instead of a family floater.

LIC's licindia.com

Of all the public sector insurance companies , the website hosted by LIC is something which totally surpised me( for a change, pleasantly). I could only wish all other public sector insurance companies could only take clue from LIC , to change, the way they use internet .

On this LIC site we can not only pay our premiums but can view our previously paid premiums.This may not seem as much , but considering the alternative where you may have to try to get to a LIC office which kind of opens at 10 AM it is a luxury.

I have a National Insurance , Mediclaim policy , it is nightmare to get this renewed each year and wish each year when the time comes for its renewed that National Insurance ( which is currently seems to be spending a lot of money on print Ads ) just changes its pre historic website and help me renew my policy ( but unfortuantely this is just a dream for now )

If you have not tried this feature , would strongly recommend that you try this and i'am sure that paying LIC premiums would be a breeze