All you need to know about various insurance products, reviews and comparisons across life, health and disability (accident).
The purpose of insurance is to provide protection against risks, which have the ability to set us back financially. For a relatively small premium amount, you can create an insurance cover that can compensate you when the insured event occurs.
The primary risks that an individual faces include:
a) Loss of life – Financial dependents need to be provided for to take care of their needs in your absence.
b) Health related: You may undergo treatment for diseases or due to accident leading to huge expenses related to hospitalisation, medicines and recovery. Critical illness may lead to an extended period of hospitalisation and treatment.
c) Disability (accident related) – You may live but your physical body may suffer damage due to an accident and leading to a temporary / permanent loss of income.
d) Other general risks including house theft, loss due to fire, etc.
Fortunately, certain insurance products can help you protect yourself and your dependents from the above risks.
#1 Life Insurance:
The purpose of life insurance is to provide enough financial back up to your family/dependents so that they can take care of their living expenses and other major goals, even in your absence.
A term plan, a plain vanilla life insurance cover, is the most apt product to serve this purpose.
Here is a stand alone article on How to calculate your life insurance cover requirement?
If you have used the Financial plan workbook, then your dashboard will tell you the requirement amount of term insurance.
Which term plan to buy?
Most term plans now offer similar benefits with very little difference in premium. Plans from HDFC Life, Max Life, ICICI Pru or TATA AIA can be considered.
I personally have my term plan from HDFC Life (Click 2 Protect) and Aegon Life (iTerm).
Here is a note on HDFC Life Click 2 Protect 3D, you must read before you press the buy button. It’s about the riders – which ones should you go for?
#2 Health Insurance:
The purpose of health insurance is to help you take care of large medical expenses including surgery, hospitalisation, diagnosis, recovery, etc.
A Mediclaim policy along with a Super Top-up plan serves the purpose to cover for such expenses and risks.
Here is an exclusive and comprehensive Guide on Health Insurance – How not to get tricked. It covers the key concepts that you should pay attention to while buying health insurance as also a comparison of 3 plans.
#3 Accident / Disability Insurance:
The accident & disability policy’s primary purpose has to be to provide for a lumpsum benefit in case of Permanent Disability and an income benefit in case of Temporary Total Disability. This income payout is usually weekly. The benefits can vary as per what the actual disability and it’s extent is.
In India, a disability cover is offered only with an Accident policy. You have to optimise your cover for maximising the income benefit under this policy.
There are 4 important benefits with an Accident+Disability policy
- AD (Accidental Death) – 100% of the Sum Assured is paid out. Some policies make it 200% too. But, if you have a decent term plan cover, this becomes really unimportant.
- PTD (Permanent Total disability) – The PTD benefit is available when any 2 out of total of 6 body parts (2 eyes, 2 feet and 2 hand) are completely damaged – in any combination. 100% of the Sum Assured gets paid out in this case.
- PPD (Permanent Partial Disability) – Depending on the body part damaged, certain % of the cover is paid out. For Example: If one loses a single eye, 50% of the Sum Assured is paid out. The policy wordings of the plan will have the details of the payout.
- TTD (Temporary Total Disability or Loss of Income benefit) – Because of accidents, if a person is bedridden and loses his/her income, then the insurance company provides a weekly compensation upto 100 weeks or till the time the person recovers, whichever is earlier. The income benefit is usually 1% of the Sum Assured. You should pay special attention to this benefit. While it is optional, it is ideal to include it in the policy.
Different insurance companies design their accident + disability policies in different ways and some them can be really messy. You need to focus on the disability clauses more than anything else.
Which Accident + Disability policy should you buy?
Amongst HDFC Health (erstwhile Apollo Munich), Max Bupa, and Tata AIG, Tata AIG’s Accident Policy stands out. It gives out a large enough cover that too at a reasonable cost.
How much Sum Assured should I opt for?
Ideally, the Sum Assured for an Accident policy should be equal to your Term Insurance. In case of disability, the loss of economic benefits to the family / dependents is similar to loss of life.
Having said that, in the Knowledge Era, one can still rely on the area between the ears to provide value.
So, what is the base minimum cover required? Use, the Financial Planning Workbook and it will give you the base minimum cover you should be going for.
Note: It is highly advisable that you take your insurance cover (any) through an insurance agent. When claim time comes, it is better to have someone to take care of the operational stuff, while you or your family can focus on the individual.
In case, you don’t know a good, trustworthy insurance advisor, do write and I will be happy to recommend.
If you have a plan that you wish to evaluate or compare, do write in with the details and necessary links/documents.