3 types of insurance you should have in your financial arsenal

Purchasing insurance is one of the most important decisions you can make in life. But it is seen that the reference to death and disability in insurance agreements makes it difficult for some people to talk about it.

Buying insurance is a tricky business. Unlike buying a tangible object such as a watch or a mobile phone, insurance purchase is like believing in a promise. A promise from the insurance company that says you will be financially protected in case something catastrophic happens in your life. However, many people question the value of insurance as it is a long-term investment that may not provide the expected benefits to the policyholder. Some people are of the opinion that the wealth they accumulate throughout life is sufficient to cover the damages caused by an unpleasant eventuality in the future. But the problem is that the expenses incurred after an accident, disability, or death may exceed one’s savings by a great margin. This is where the significance of an appropriate insurance plan comes into the picture. Purchasing insurance is one of the most important decisions you can make in life. But it is seen that the reference to death and disability in insurance agreements makes it difficult for some people to talk about it. Complicated insurance jargons add to the disinclination. To tackle these issues, we have narrowed down your options to just three of the most essential insurance plans you should equip yourself with. Here they are:

1. Auto insurance - With the easy availability of car financing options today, it makes sense to purchase a car for your daily commute. If you already own a vehicle, it is crucial to protect it with a suitable insurance cover.

Motor insurance companies in India offer car and two-wheeler insurance policies to customers along with add-on covers to enhance the protection of the base policy. In order to buy the most suitable insurance cover for your vehicle, you should assess your specific needs and compare policies online. The facility to compare plans and calculate premium is available online at neutral financial websites. The icing on the cake is the fact that these services are offered at online portals absolutely free of additional charges. There are two types of motor insurance plans for private cars in India:

• Third-party liability insurance - This insurance cover has limited coverage and is more suitable for people who are looking to insure cars on a budget. The disadvantage of taking such a plan is that you could be at risk of being underinsured. Moreover, it is not possible to enhance the coverage of the base plan using ancillary covers. This insurance cover protects the car owner from liabilities arising from injuries, death, or property damage of a third party in an accident. It does not cover the insured vehicle or the policyholder. Third-party liability insurance also happens to be the minimum level of insurance that every vehicle in India should have (as per the Motor Vehicles Act, 1988).

• Comprehensive car insurance - This insurance plan offers extensive coverage to the insured vehicle. This includes protection from natural and man-made calamities, in-transit damages, accidental losses, theft, vandalism, and the like. It also offers protection to the vehicle owner from accidental disability and death. The coverage under this plan can be boosted through optional add-on covers that are offered by the insurance company. You can purchase add-on covers based on your personal insurance needs.

2. Health insurance - Illnesses and injuries can happen at any point of time, making a visit to a hospital an inevitable part of a person’s life. Health insurance covers the cost of medical treatments, apart from offering many other significant benefits. Some of the advantages of opting for a health insurance plans are:

• Health insurance protects you from the rising cost of medical care.
• Some policies offer free preventive care that includes screenings, vaccinations, and preliminary check-ups.
• You can avail insurance protection for your entire family cost-effectively through family floater plans.
• Cashless hospitalisation facility is a remarkable offering from health insurance companies. If you have opted for a scheme that provides cashless hospitalisation, you need not pay for the medical treatment upfront. You should be aware that you will have to get treatment at a network hospital to benefit from cashless hospitalisation. After the treatment, the insurance company settles the bills on your behalf directly with the network hospital.
• You can opt for a critical illness cover to supplement your health insurance policy coverage. This provides you protection from several life-threatening diseases that could otherwise derail your financial planning.

3. Life insurance - Buying a life insurance policy is the safest and smartest way to protect your loved ones against unpleasant incidents such as death or disabilities. It is basically a contract under which the life insurance company offers financial protection to the policyholder’s family at his/her demise for the policy term. The policyholder would pay the insurer a predefined sum of money, i.e., the premium, at regular intervals.

The policyholder can choose to include several other contingencies in the contract by paying extra premium. These add-on insurance covers are called life insurance riders. Life insurance can also be used as an effective financial planning tool, as insurers nowadays offer an array of plans with investment benefits in addition to protection. This is particularly useful for people who are otherwise unable to make regular investments in equities or debt instruments. Life insurance companies also offer policies for specific customer demographics such as children, senior citizens, women, etc. A significant advantage of buying life insurance is the tax benefits that the policy offers. Some plans also enable you to avail policy loans for emergencies. If you are looking to purchase insurance, it is advisable to do it online. Insurance companies offer attractive discounts on online insurance policies, as this mode of insurance retail eliminates the processing and distribution costs that are associated with offline policy sales. Online policy purchase is also highly secure and suits the fast-paced lifestyle of the modern tech-savvy customer perfectly.