The other day, I overhead an animated discussion between my cook and maid about their respective insurance cards and benefits! One was exhorting the other to update her card because “they are giving five lakh rupees insurance” on the new card.
It was a heartening moment, and set me wondering, ‘what if all sections of society developed this awareness of the benefits of insurance?’
That could well be the end of depletion of life-time savings of families due to depressing illnesses. Children wouldn’t have to drop out of school because the breadwinner died. Small businesses will not close down due to a fire, natural calamity or burglary. More relevant to the times, we can have financial security in our old age.
The first step to all this is awareness and information. There is much to be understood and appreciated about insurance in India .
Why buy insurance?
The simple response to this question is, because life is uncertain and insurance is a shock absorber. ‘I don’t get any return for the premium I pay. Insurance is just money down the drain,’ is a common complaint.
The value you receive for the premium may not be tangible like a bank fixed deposit interest or dividend from a mutual fund because the role of insurance is different.
Some policies do give returns, but the core purpose is to cover against that unknown event which can strike anybody at any time and affect your property, your health, your earning capacity as a living person, your standard of living after you retire and so on.
Think of it as the lock on your house, the helmet you wear or your seatbelt. It protects. You should not expect it to double in value.
With insurance, you can proceed with your life in peace with the reassuring thought that you, and your loved ones, have the financial support to face any setback.
When to buy
The time to buy insurance is now as no one knows when misfortune will strike. You need a policy in place to claim for today’s loss.
Also, once you develop a disease, you may not be able to get coverage easily or at a good rate. If you do, there will be a waiting period for hospitalisation claims due to this pre-existing health condition.
If somebody dies without life insurance, the opportunity to protect the family is lost. This is why ‘earlier the better’. For Life, Health and Annuity (Pension) policies, premiums are significantly lower at younger ages and more benefits accrue over a longer period.
For example, a basic hospitalisation policy for ₹3 lakh costs you about ₹3,000 a year when you are in your twenties and over ₹4,000 a year in your forties. That is, if you have not developed any health complications. Similar is the case with any life insurance policy.
Income tax time is insurance time! Life and health insurance, and annuity policies have tax benefits, so make sure you have renewed them. If you have plans to buy new policies or top up your coverage, this is a good time.
(The writer is a business journalist specialising in insurance & corporate history)