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Uncertainty is omnipresent today and we live in a world full of uncertainties around us. We never know what will happen in the next hour or day! We need to be prepared for the best and the worst. One unfortunate event happening can cripple the entire family and wipe out years of financial savings. Insurance is an important tool in protecting a family’s financial well-being. You and your family need insurance for proper coverage and financial support against all risks relating to your life, health, and property having financial implications. Insurance is considered as a safety net that protects you from financial troubles on rainy days.

Let us see some examples to understand this:

• Siddesh dies young leaving his dependent wife and kids without financial support.
• Sindhu’s car met with an accident and requires a large sum for repairs.
• Mohit suffers from arthritis and has to spend a large sum each month on physiotherapy.

In all the above situations, there is either a loss or a large expense that has to be met out of available income. In order to avoid such situations, it is necessary to opt for suitable insurance policies that provide cover against any disruption in income and the financial situation of an individual. Adequate coverage for the D’s of life - death, disease, disability and damage is a must for everyone.

If Siddesh had a life insurance policy for a sum adequate to meet his family’s financial needs and goals, then he would have protected them from the financial shock of his death. Similarly, a motor insurance policy would have covered the cost of repairs to Sindhu’s car and her savings would not have been affected. A health insurance policy would have easily covered the cost of physiotherapy.

Insurance, as a product, is the key to your wealth or financial protection. Here are some reasons which make insurance a vital constitution of one’s financial planning and financial well-being.

1. Financial Security

No matter how much you are earning or how much you have saved; your financial position can be dented by an unexpected event in a moment. So, the best way to become financially secure is to cover yourself, your family, and your assets with insurance. Insurance provides financial support and reduces uncertainties that individuals face at every step of their life cycles. It enables you to continue living with minimal worry, especially when large financial burdens like medical bills, mortgage, debts and others would easily change the financial status of your family. For instance, with medical inflation growing at approximately 15% per annum, even simple medical procedures cost enough to disturb a family’s well-calculated budget, but a Health Insurance would ensure financial security for the family.

2. Continuity of Life Goals 

By minimizing the financial impact of unfortunate events, we are not just safeguarding the present but also protecting the future for everyone. We can reasonably expect that our life continues as it should to the best extent possible even in the worst scenario provided we have the adequate protection with the right cover. Thus, critical life goals like buying a home, education for children, marriage for children, retirement for spouse, regular income, etc. ideally should not be compromised. We have also seen tragedies push back With the financial support from claim proceeds of insurance policies, one can even help avoid and pay-off debt.

3. Peace of mind

There are different types of insurance plans to cover the different types of risks that you might face. You can, thus, choose different policies based on the risks that you face and create a 360-degree layer of financial protection. Having adequate and broad insurance coverage will give you peace of mind and no amount of money can replace this. With insurance, you are assured that you and your family members are financially secure against any unforeseen events in life. It also ensures that in case of any emergency, you are in a position to handle the same. For e.g., if you have a medical emergency, with adequate health cover available, you will be able to get the required medical attention/treatment. With life insurance, you are assured that your family will not suffer financially in your absence. Access to financial support ensures that you can get the best treatment possible and make good on any losses.

4. Tax Benefits

Life and health insurance policies also offer additional benefits as tax saving instruments under 80C & 80D. Furthermore, under life insurance plans, the maturity and death benefits received are also exempt from taxation as per Section 10(10D) of the Income Tax Act. Tax benefits however should not be considered as the primary objective of any insurance decision but as a by-product benefit.

5. Saving and Investment

In addition to the primary objective of protection against financial risks, there are products offered by insurers which also provide in-built savings /investment plans. Savings plans are protection-cum-investment policies that are designed to aid in disciplined and periodic savings in addition to giving basic insurance coverage. Products like endowment savings, money-back, ULIPs or unit-linked insurance plans and annuity plans are available in the market. Although such products are popular in the industry, we believe that such products cater to a very specific kind of customer and it is always recommended to check on the suitability of such products for your needs with the help of your insurance advisor /agent. 

The Bottom Line

The best-laid plans can go haywire. Life has a tendency to throw surprises at you. Thus, the need for a contingency plan to absorb the financial shocks of such surprises. A proper, full insurance need assessment would probably be the starting point for understanding your needs. A comprehensive cover may cost you a bit today but will surely save you on a rainy day. 

A Health Insurance is a must today. Every individual and family must be protected against the very probable risks to our health. The recent pandemic did a lot to push this awareness to everyone. 

However, selecting a health insurance plan is not as easy. With a mature health insurance market today in India, the choices are aplenty. While this is a good thing, choosing the most suitable product and features is not easy and we run the risk of loosing ourselves in jargons and the long list of features. The health insurance decision entails a good amount of understanding and consideration of our needs and our budget /affordability for the same. In this article, we will attempt to lay down the path for this decision-making.

1. Understanding your needs: 

The first step towards buying a suitable health insurance plan is a proper analysis and assessment of our requirements. The first questions usually are - who all are to be covered? What amount of cover do you need? Are there any specific health risks you wish to cover? What is existing health insurance cover?. These are just the primary questions which will set the broad parameters of the kind of health cover you need - like individual policy or family floater, cover for parents, critical illness cover, top-up or super top-up plans and the extent of the cover desired. With this clarify, next you need to decide on the type and the extent of your health coverage. For this, you must take into account the age, medical history, pre-existing illnesses, if any, etc. before finalising the sum insured and plan. 

2. Research the Insurers

You would not likely buy anything from someone who you do not trust. And buying a health insurance policy is a very critical decision that can have ramifications after many years. So, before you actually look out for the cheapest policy available with the most comprehensive cover, it is advisable to zero down on a list of preferred insurers. It is important to compare the various health insurance providers and understand few things, including the claim settlement ratios, the ease of the claim process, the network of cashless hospitals, customer support and their customer reviews /feedback in general. 

3. Check Policy Benefits

With the insurers shortlisted, the next step would be to check out and compare the policies of these preferred insurers. A health insurance policy has many benefits and features which we have discussed here in the past. Important among these are - the scope of cover for pre- and post-hospitalisation expenses, pre-existing diseases, consumables cover, OPD cover, maternity & newborn cover, ambulance expenses, room rent limits, network of cashless hospitals, deductibles, ​​restoration benefits, critical illness cover, AYUSH treatments and so on. You must also consider the relevant add-on covers to make your health insurance policy more comprehensive. 

While all features, benefits and add-on covers may look appealing, they may come at an additional cost. So, you need to strike a balance between the features and add-ons and the premium that you can afford. You will have to decide on what features are must-have and which can be considered as optional which you can skip in order to balance the equation.

4. Making the decision

With clarity on the type of insurance, the preferred insurers, the features and benefits required and the premium amounts for short-listed policies - you have all the ingredients ready for the decision-making. The next steps would be filling out the proposal forms and undergoing medicals, if any required. Remember that this too is a critical step and one should be honest in disclosing all facts to the insurers. We do not want a situation where any misrepresentation or hidden fact comes to light and becomes the reason for claim rejection in future. If you have any serious existing ailments, please consult your insurance advisor to guide you on the matter before you start searching for a policy. This is why we always say that it's better to not delay buying any insurance and the best time would be when you are young and healthy. 

Conclusion: 

Buying a health insurance is an important decision in life. Even after buying your health cover, it is important that you revisit your insurance portfolio every few years and plug any gaps that you see. It may happen that a policy bought five years ago looks inadequate today with high inflation in medical expenses and your improved and changed lifestyle. Whether you are buying health insurance for the first time or buying additional covers, a thorough assessment of needs and the products is required. Here is where your insurance advisor can be of great help in guiding you and helping you may the right decision. If you haven’t spoken with your insurance advisor on this for long, perhaps now is the right time to invite him/her for a cup of tea. 

Congratulations, You made the right decision to buy insurance. Now for the hard part.

Buying insurance is not an easy, straightforward process, Irrespective of the type of insurance. Be it health or life insurance or any other type of insurance, today, there are multiple insurers to chose from and also multiple choices of products available. Even this is just one side of the story. There are other things critical before and during the insurance buying process. In this piece, we will deep dive into this process and explore some important elements of insurance buying.

For the sake of convenience, let us break up the insurance buying process into the following 4 steps.

1. Need Assessment

2. Product Selection

3. Application Process /Proposal

4. Post Purchase

Let us now explore these points in detail.

1. Need Assessment:

The starting point for any insurance purchase is obviously deciding what type of insurance is needed. A comprehensive need assessment to holistically assess your insurance needs should be done regularly, perhaps once every couple of years at least. Need assessment would mostly cover personal risk areas and related solutions like health, life, personal accident and critical illness insurance. Beyond this, covers like motor, home, fire & marine, shopkeepers insurance, professional liability /indemnity, etc, and even Covid-19 related policies may be explored on a case of case basis. For this article, we will limit our scope to the personal insurance covers only.

Buying any personal insurance product depends on a lot of factors like your age, your life stage, number of dependents, existing covers, etc. After a product is decided, the next important question is how much cover you should have and the term of the cover? This again will depend on your earnings, lifestyle, the number of dependents, probability of risk, metro/non-metro city, etc. Needless to say, the higher cover taken at an early age, where medical issues are yet to arise, is highly recommended.

2. Product Selection

With multiple insurers and products, all with different features again is not easy. The right product selection is very crucial, and you will need to go into details to clearly understand the product features and even policy wordings. One important element here is to ensure that the premium fits in your pocket for the required cover. So an optimal balance may be required here. Another choice here is that of riders. Obviously, riders do offer some advantages but may not be always preferred and excessive riders are not required. Stand-alone products, like say critical illness, “may” offer better coverage and features rather than having them only as a rider. To sum up, with the product, the cover, premium amount, premium paying term, policy term and riders /add-ons will be decided at this stage.

3. Application Process:

The insurance buying process normally starts with the quote generation by your insurance advisor which will have the short-listed products. Upon selection of the product with cover, the proposer will be guided to a proposal form. The proposal form is the most important and basic document required for the insurance contract between the policyholder and the insurance company. It includes the insured's basic information like address, age, name, education, occupation etc. It also includes the person's health status and medical history.

The proposal form helps the insurance company to calculate all the potential risks in relation to the insurance policy and hence deciding the premium amount. Needless to say, this has to the filled in as per the principle of ‘Utmost Good Faith’, which we would like to briefly cover here. After submission of the proposal form and payment of the premium, the process will end for you except in cases where the medical test, from an emplaned doctor with the insurer, is required. After this, the proposal is received by the insurer who is free to review the details and either accept or reject the proposal. Based on the information disclosed, a ‘medical underwriting’ may also be done by the insurer.

4. Post Purchase.

After the insurer is satisfied with the details required, the policy will be issued. You are expected to keep all the policy documents safely and handy at your end. Today, insurance policies are also being saved in digital format in your E-Insurance Account, which may be applied for /disclosed during proposal form filing. It is important to check that the details of the policy, including all personal details and disclosures, is accurate to avoid any issue in future. Once you receive the policy document in hard copy, please check all the key details properly. In case of life and health/PA policies do check the medical history, occupation, etc is captured correctly as you have declared. For vehicle insurance, you must check the registration number, fuel type and claim history. In case you find any discrepancy, please contact your adviser to make the required corrections in the policies. If everything is in place, the process of insurance purchase ends here.

An important point to note here is that policyholders get a ‘free look-in period’. If for any reason you feel that the policy terms & conditions are unacceptable or there was any mistake in buying the policy, the policy may be returned. A refund will then be processed, less any expenses and proportionate risk premium for the period used.

In brief:

Identifying your insurance needs, deciding the appropriate cover and term and closing on the right, the suitable product is easier said than done. We would strongly recommend that the readers approach their insurance advisors for the right guidance. Please note that, unlike investments, buying insurance is a long-term contract that can have serious consequences when an unwelcome event happens. You may not buy another policy of similar nature for at least a few years, if not more, and thus, it becomes even more critical that the right decision is made, something you don’t regret later. To kick-start the new financial year in the right spirit, we would urge everyone to undertake a holistic need assessment with their insurance advisor. We wish you a safe, healthy and prosperous new financial year.

It was cold, windy evening of January 2012. Mr. & Mrs Arora (retired couple, both senior citizens) were enjoying winter evening & having a cup of hot coffee in their 3 BHK luxurious apartment in South Delhi when they received a phone call. Next 15 days were one of the worst period they experienced in their lives. Their son, Mr. Akash Arora in his late 20's met with a severe accident while driving a car on his way back to Delhi from Chandigarh due to intense fog. He incurred multiple fractures and was in hospital for 15 days. Fortunately he survived and recovered fully after 15 days of hospitalization, but the total medical bill made Aroras poorer by Rs.7 lakhs. Unfortunately Akash had medical cover of only Rs.3 lakhs assuming this would be sufficient for him at a young age of 27.

As Aroras belong to higher income group and have created wealth over the years, additional Rs.4 lakhs which they had to pay from their own pockets did not pinch them much but not all of us belong to that category. Can such type of incidence happen to any of us ? Are we in a position of bear cost of high hospitalization/medical bills on our own ?

You may argue that this can be an exceptional event and may not happen in everyone's life. But can we predict which family will suffer this trauma and which one will escape ? Another point worth highlighting here is lifestyle related health problems. In today's fast paced life when every one of us is a part of the 'rat race' and all of us want to win that race, we are leaving healthy living habits behind. Eating junk food, irregularity in eating habits, high pressured work culture resulting in incidences like heart attack at a young age or diabetics or blood pressure problems. These have become very common in India now.

Unfortunately in India we mostly realize importance of medical insurance only when something of this sort happen either to us or to our near & dear ones. Why to leave things to destiny when you can cover the risk through medical insurance, popularly known as mediclaim.

Understanding the Basic Traits of Health Insurance:
Health insurance is a contract between insurance company (insurer) and insuree who takes insurance coverage against any medical emergency by paying a specified price (called premium) depending on multiple factors. Health insurance is nothing but passing risk of bearing medical cost to insurance company against the premium paid.

So medical insurance is nothing but passing risk/cost of medical treatment to insurance company by paying premium. So in event of any medical treatment, your insurance company will pay you to the extent of insurance cover against the premium paid by you.

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