Insurance is all about tackling unseen risks that might affect an individual finance to a greater extent. In India, insurance is seen as a savings instrument and not as a risk mitigator. Moreover health insurance in india is less penetrated than life insurance.
So what is health insurance?
Health insurance reimburses the expenses of medical treatment,hospitalization and other expenses related to the treatment of your disease. There are various clauses with different health insurance policies which defines the expenses which it covers.
Why is health insurance needed?
As medical emergencies do not come well planned and these are completely unpredictable, when a person is diagnosed with a disease and requires treatment, the immediate requirement of fund for treatment takes a big toll on a person's finance and hence affects his planned investments.
With health insurance, you can be least affected with your finance, since the insurance companies takes care of all your expenses with respect to the treatment. There are even cashless claims that insurance companies offer when you get treatment from a network of hospitals that the insurance companies has tied up with.
How costly is health insurance?
To your surprise, health insurance is very cheap compared to life insurance. A health insurance policy of 5 lac in a public sector insurance company costs you roughly 6,000 per year which is 500 rs/month and very much affordable by most of us.
By spending 500 rs/month on health insurance, you are avoiding a risk of paying 1 or 2 lacs when you go undergo treatment in case of any medical emergency.
What is cashless claim?
If you are planning for surgery(bypass etc) and you are aware of the schedule, you can inform the insurance company of the same and the insurance will take care of all your expenses in the hospital and you need not spend a single paisa for your treatment. This cashless claim can be availed only at the network of hospitals that the insurance company has tied up with.
What if my employer gives me health insurance?
In today's world, most of the employers offer free health insurance to all its employees and their dependents. So people do not want to take a personal health insurance plan,but WAIT, think of the following scenario. When you have decided to leave your company and join the next company in 10 days time and what if you have met with a medical treatment during the span of those 10 days. In that case, you have to pay for your treatment since you are not under any employer's health insurance scheme during that span.
So don hesitate to take a health insurance plan, since you are avoiding a huge risk of payment by minimal contribution per month torwards health insurance.
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
What are child insurance plans?
As most of us have plans on fulfilling our children's upcoming dreams on their career, we are more vigilant in planning for their future financial needs. As with any other financial needs, proper planning will ensure that your child's future financial needs are catered to.
Most of you would have heard about "children's life insurance plan". The very common misconception is that it insures child's life, but it is not so. It is a policy which insures the parent only but the child get benefited out of it. Lets see how it works.
1. A children policy is taken by the parent as the policy holder.
2. The important feature of the policy is WOP(Waiver of Premium). In case if the parent dies during the term of the policy, all the future premiums are waived for the policy and the sum assured is paid immediately to the child of the parent.
Eg. For a 25 years old with a kid of 1 year old, the child insurance policy from hdfc for 20 years of sum assured of 1 lac have a premium of 4900/month. In case of eventuality to the parent 5 years down the line, the kid will get 1 lac immediately and all future premiums will be cancelled. On the other hand, if policy matures 20 years down the line, the kid will get 2.25 lacs when he/she turns 21.
3. There are quiet interesting child insurance policies. For eg LIC has a child insurance policy gives the option of giving 10 half-yearly installments on maturity instead of giving a bulk amount.
4. There are few insurance policies, which gives a assured amount to kid in various period of their life. (when kids turns 18, he/she receives certain %age of amount, when he/she turns 21, she gets certain %age and so on).
5. Child insurance policies comes in two flavours - ULIP and Endowment type. Endowment offers fixed rate of return while ULIP returns depends on the market. So you can make a decision after evaluating both the options.
So as with any other investment products, there are variety of child insurance plans available in the market. Have a good analysis of the policies before buying it, BUT one should definitely give a portion of insurance premium to child insurance policies.
How to calculate your insurance cover?
There are well known methods to arrive at a ideal insurance cover for an indiviual.These further explains the significance of term insurance
Income Replacement Value
1. Age = 40
Annual Income = 5,00,000
Retirement Age = 60
Insurance Cover needed = (60-40) * 5,00,000 = 1 crore
Another variation, is to mutiply the income with a mutiplier to calculate your life cover.The multiplier differs across various age groups
20-30 years = 5-10 times annual income
30-40 years = 15-20 times annual income
40-50 years = 10-15 times annual income
50-60 years = 5-10 times annual income
So when you fit into any of this category and calculate your insurance cover it would be amounting to a significant sum.
When going for a typical endowment policy for such a insurance sum(eg 1 crore for 40 years old earning 5 lacs annually) , the premium would shoot to very high levels.
Term insurance 's cost benefit will be best exploited in these scenarios.
Always keep Insurance and Investment seperate.
Related Topics
What is term insurance?
Income Replacement Value
1. Age = 40
Annual Income = 5,00,000
Retirement Age = 60
Insurance Cover needed = (60-40) * 5,00,000 = 1 crore
Another variation, is to mutiply the income with a mutiplier to calculate your life cover.The multiplier differs across various age groups
20-30 years = 5-10 times annual income
30-40 years = 15-20 times annual income
40-50 years = 10-15 times annual income
50-60 years = 5-10 times annual income
So when you fit into any of this category and calculate your insurance cover it would be amounting to a significant sum.
When going for a typical endowment policy for such a insurance sum(eg 1 crore for 40 years old earning 5 lacs annually) , the premium would shoot to very high levels.
Term insurance 's cost benefit will be best exploited in these scenarios.
Always keep Insurance and Investment seperate.
Related Topics
What is term insurance?
What is Term Insurance?
If you go to a set of life insured people and ask them as to what policy has they acquired, most of them atleast in my friends circle don know even the name of policy, which shows their height of ignorance. The rest will give the very famous answer of "Jeevan Anand" or some other endowment or moneyback policy name.
The concept of Life Insurance is totally misintrepreted in our nation, it is seen as an investment avenue. The main mantra behind life insurance is RISK COVER, which most of us don even cares about here. INSURANCE SHOULD KEPT SEPERATE FROM INVESTMENTS. There are adequate alternate choices for better investments.
If you take a survey among the LIC policy holders, for sure not more than 5% of them would have even heard about TERM INSURANCE. This is the policy from LIC which is a PURE RISK COVER policy in nature. There are only such TWO policies offered by LIC (which shows that even the organisation is willing to sell this policy). The name of the policies are
1.Anmol Jeevan
2. Amulya Jeevan
How different are these plans from the endowment plans?
1. Cheap Premiums for very high sum assured amount. For eg., for a 50,00,000 cover for a indiviual of age 21 for the period of 35 years, the premiuim is as low as Rs.13,350. Whereas in jeevan anand which is a endowment policy, for a sum cover of 5,00,000 itslef, the annual premium is 12660. This clearly explains high cost involved in endowment policies.
2. Theres no payment of sum assured on maturity of the policy. THIS IS THE WAY A LIC POLICY SHOULD OPERATE. You may ask in endowment policies, we get back sum assured plus assured bonus, so whyd shud i waste my premium if i cant get anything back. I will
explain that question pretty elaborately with a good example.
Lets assume a 25 lakh policy for an indiviual of age 21 for a period of 10 years.
Case 1: Amulya jeevan (Term Insurance)
Annual Premium : 5300
Case 2 : Jeevan Anand(Endowment plan)
Annual Premium : 2,82,170
Final amount : Rs 37 lakh.
So Now get the difference between the two premiums.
2,82,170 -5300=2,76,870
Assuming you take a term plan and start a SIP of 23,000(which 2,76,870/12) in reliance vision fund, for 10 years. From the last 10 year track record,
Final Amount : 2,30,30,594 ( 2.3 crores).
2.3 crores Vs 37 lakh speaks for itself. If you are smart enuf of not wasting money in paying hefty premiums, you can become a crorepathi instead.
BUT DON EVER EXPECT A LIC AGENT TO TELL U ABT TERM INSURANCE. You have to get it done from him, coz agents do not get much commission from these policies.
The concept of Life Insurance is totally misintrepreted in our nation, it is seen as an investment avenue. The main mantra behind life insurance is RISK COVER, which most of us don even cares about here. INSURANCE SHOULD KEPT SEPERATE FROM INVESTMENTS. There are adequate alternate choices for better investments.
If you take a survey among the LIC policy holders, for sure not more than 5% of them would have even heard about TERM INSURANCE. This is the policy from LIC which is a PURE RISK COVER policy in nature. There are only such TWO policies offered by LIC (which shows that even the organisation is willing to sell this policy). The name of the policies are
1.Anmol Jeevan
2. Amulya Jeevan
How different are these plans from the endowment plans?
1. Cheap Premiums for very high sum assured amount. For eg., for a 50,00,000 cover for a indiviual of age 21 for the period of 35 years, the premiuim is as low as Rs.13,350. Whereas in jeevan anand which is a endowment policy, for a sum cover of 5,00,000 itslef, the annual premium is 12660. This clearly explains high cost involved in endowment policies.
2. Theres no payment of sum assured on maturity of the policy. THIS IS THE WAY A LIC POLICY SHOULD OPERATE. You may ask in endowment policies, we get back sum assured plus assured bonus, so whyd shud i waste my premium if i cant get anything back. I will
explain that question pretty elaborately with a good example.
Lets assume a 25 lakh policy for an indiviual of age 21 for a period of 10 years.
Case 1: Amulya jeevan (Term Insurance)
Annual Premium : 5300
Case 2 : Jeevan Anand(Endowment plan)
Annual Premium : 2,82,170
Final amount : Rs 37 lakh.
So Now get the difference between the two premiums.
2,82,170 -5300=2,76,870
Assuming you take a term plan and start a SIP of 23,000(which 2,76,870/12) in reliance vision fund, for 10 years. From the last 10 year track record,
Final Amount : 2,30,30,594 ( 2.3 crores).
2.3 crores Vs 37 lakh speaks for itself. If you are smart enuf of not wasting money in paying hefty premiums, you can become a crorepathi instead.
BUT DON EVER EXPECT A LIC AGENT TO TELL U ABT TERM INSURANCE. You have to get it done from him, coz agents do not get much commission from these policies.
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