The primary reason to purchase any insurance is to protect whatever is essential to you. In order to build a sound financial portfolio, you need insurance to stand as a fundamental pillar to ensure your financial security in any situation. There are many different types of insurance designed to protect diverse assets.
For instance, pure protection insurance such as a term insurance policy is one of the first insurance products to buy if you have dependents. While there are different types of insurance available in India, you need to know which types of insurance you should have in your financial arsenal.
Types of Insurance
Buying insurance is like a rite of passage in Indian families—it shows that you are now an earning member of society who is stepping up to fulfil their financial responsibilities for today and tomorrow. While buying insurance is a straightforward process, it is essential to know about the different types of insurance and their particular importance.
Choosing the right types of insurance to add to your financial portfolio is pivotal. The exact type and cost of insurance depend on many factors, including your age, lifestyle, dependents, employment, and gender. Here’s a look at a few basic types of insurance that financial experts recommend for everyone.
Meeting uncertainties along the way is the one inevitable fact of life. Even the best-laid plans can go awry. So, it becomes even more critical to plan for contingencies. While you are alive and well, you can shoulder the responsibility of taking care of your family members and loved ones. But what happens in case of your untimely demise?
A life insurance policy is a binding legal contract made between the policyholder and the insurer. Under this contract, the policyholder pays a fixed amount as a premium in exchange for life cover. If the policyholder were to die during the life insurance policy tenure, a designated sum assured would be paid to the nominee/dependents listed in the life insurance policy.
A term insurance plan is one of the types of insurance that you must have, especially if you have dependents. A term insurance policy is straightforward pure protection insurance that offers a death benefit for a fixed, affordable premium that keeps the policy in force. However, it is essential to note that a term insurance plan does not typically have any maturity or survival benefit associated with it.
There are many types of insurance plans that offer periodic pay-outs, like a cashback life insurance policy. Falling under the broad marquee of endowment life insurance policies, such plans go a step further than protection insurance policies by offering you a savings component as well. For example, you can easily use a life insurance policy that provides maturity benefits in the form of your saved premiums and accrued additions and bonuses, if any, as a savings account. This lump sum amount can be used to pay for your children’s education, pay off loans or mortgages, or make new capital purchases.
It is always wiser to buy protection insurance in the form of a term insurance plan as early as possible. This is because the premium you pay depends on how much of a risk you present for the insurer—the younger you are, the cheaper it is to cover your life. Since you will continue to pay the same premium amount over the life of your policy, buying a term insurance plan when you are younger is a financially sound choice.
Sometimes even the most mundane illnesses can take a turn for the worse. Keeping in mind soaring healthcare costs, hospital expenses, and doctor’s fees, it is essential to have your healthcare covered by the right health insurance plans.
Studies show that unexpected healthcare expenses can easily lead to bankruptcy. However, with a good health insurance policy, you can rest assured that you and your covered family members will be cared for in case of any health issues.
While purchasing a health insurance plan, consider the exclusions in the policy, costs, affordability, deductibles, and premium amounts. Most health insurance plans can be renewed year on year. When you are young and healthy, purchasing a quality health insurance plan ensures that the premium rates are low.
Personal Accident and Disability Insurance
An accident may happen at any point in time. Some accidents may result in damage to property and vehicles, while others may cause a partial, permanent, temporary, or total disability. While it may sound macabre, it is definitely something to think about. Imagine having an unfortunate accident that results in a permanent disability that stops you from earning the wages you used to make before. For all intents and purposes, such an accident would change your life as you knew it.
A personal accident and disability life insurance policy can offer you the protection you need at such a trying time. Similar to a pure protection insurance plan such as a term insurance policy, a personal accident policy also provides a death benefit in case of an untoward event. In addition, depending on the terms in the plan, a personal accident policy typically supplements any lost income by providing for the replacement of income for a fixed period.
Other types of insurance
Term insurance, life insurance savings policies, health insurance, and personal accident or disability insurance are a few of the basic types of insurance that every independent earning person must have. There are other types of insurance plans that you may opt for depending on your specific needs.
- Auto insurance – If you own and drive a vehicle, it is mandatory to have liability cover. However, you can also opt for comprehensive insurance covering you against financial losses while also offering liability protection insurance if your car causes injuries or damage to others.
- Homeowner’s/Renter’s insurance – A homeowner’s insurance policy offers your house protection against damage and theft.
- Critical illness insurance – In the case of diagnosis of a critical illness listed in the policy, these types of insurance plans pay out a lump sum amount.
Be smart about buying insurance
The whole world is at your fingertips today. Pretty much all types of insurance can now be purchased from the comfort of your home. Life insurance plans offer many different benefits, features, and rates. Research the types of insurance you want, understand the coverage and the cost you will be incurring, and make an informed choice for yourself and your loved ones. You may also speak to your financial planner or an insurance agent to ensure that you have completely understood the fine print in the policy document before you sign the dotted line.
IndiaFirst Life takes pride in offering the people of India essential insurance policies that are easy and hassle-free to buy. From IndiaFirst’s pure protection insurance and term insurance policies to wealth creators and savings plans, every life insurance plan is well-defined, transparent, and simple to understand.
Losses may be inevitable in life, but there is no need for you to suffer financial strain at the same time. Insurance helps you protect yourself and your loved ones against life’s inevitable uncertainties. Use these basic types of insurance to cover your bases before you turn your attention to wealth creation and market-linked life insurance plans.
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Yes, Non-Resident Indians (NRIs) can buy life insurance policies in India. According to FEMA (Foreign Exchange Management Act), NRIs and PIOs (Persons of Indian Origin) can purchase life insurance policies in India, given they fulfil certain conditions.
Knowing the difference between Term Insurance vs. Life Insurance can boost your financial protection
Life insurance is synonymous with protection, as it offers financial security in many ways. There are two types of life insurance plans: Term insurance and traditional life insurance policies, which include Pension plan, Child plan, Whole Life plan, Money Back plan, and Endowment Plan.
Imagine a low-risk investment that has the potential to grow your savings, create wealth, help you achieve long term goals, and secure you financially for decades!