Topic 1: Insure your Life and Health

Buy a term Plan

Buying a term plan tops the list of smart money moves. The earlier you buy life insurance, the lower is the premium.

We did some number crunching arid found that if the cover is till the age of 60, the total cost of buying the plan at the age of 25 or 35 or 45 is roughly the same. While you pay the same price, your insurance term will be lesser. More importantly, a person who buys late is taking a big risk until he gets protection. If he develops a medical condition later in life, he may have to shell out a significantly higher premium. If the problem is severe, he may be denied the cover altogether.

Keep a few things in mind when you go shopping for a term plan. First, the insurance cover should be big enough to generate a monthly income for your family. cover major expenses, and settle outstanding loans. _

Secondly, the policy should cover you at least till the age of 60. Don't take a short-term cover of 10-15 years, which ends when you are in your 40s. You need insurance most at this stage of life and a fresh policy will cost you a bomb. Lastly, don't try to lower the premium by misstating facts in the form. If you smoke, drink or suffer from a medical condition, don't hide it. It may bump up the premium by a few hundred rupees, but your nominee's claim won't be rejected because of misstatement of facts.

Health Insurance

Health insurance is also cheap when you are young and costlier when you are old. More importantly, the rule about pre-existing diseases makes a compelling case for buying a cover early. When you are young and in fine fettle, the 3-4 year waiting period is a breeze. Delay buying the policy and you may get afflicted by medical conditions that usually crop up in the late 30s and 40s.

Don't harbour the misconception that your employer's group health plan will be sufficient While these are useful, they do not provide adequate coverage. Besides. if you lose your job or switch to another company, you may be rendered uninsured for a certain period.

A basic indemnity plan, which reimburses hospitalisation expenses, should be your first health insurance policy. Self-employed professionals also need to insure themselves against loss of income due to hospitalisation. They can supplement the base cover with a fixed benefit policy. which pays them a certain amount for the period that they are out of action.

The cover can be enhanced by taking riders or policies to cover critical illnesses and surgical procedures. However, these should be seen as additions to, and not replacements for, the basic indemnity plan.
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