Do I need Insurance?

Do I need Insurance?

You must have asked this question to yourself many times, whenever you meet any insurance adviser or you see a commercial on your television. Somewhere in our mind we do have this confusion. If you are also one of them with this question in mind, well this article may help you decide.

Lets list few questions related to insurance that normally confuse us.

• ·         Do I need Insurance?
• ·         How much Insurance cover do I need?
• ·         Which plan should I go for?
• ·         Which company should I choose?
• ·         How can I get Insurance?

Now let’s see the answers of all these questions step by step.

First of all, Insurance has two parts.

• ·         Life Insurance
• ·         Non-Life Insurance (General Insurance)

We are here discussing life insurance related issues. Technically, when a nominee gets paid by the insurance company after the death of the insured person, it is known as life insurance.

Any insurance cover, which does not pay only after the death of the insured, is known as Non-life or General Insurance. Like car insurance, health insurance, fire or earthquake insurance.

So, in the life insurance policies, my family will receive a lump sum amount in case I am not there. But the most importance point is to understand, why we need a life insurance cover.

Life insurance policies cover the financial loss to a family in case of the death of an earning family member. If you have financially dependent members in your family and they are not able to maintain the same lifestyle after you are not there, you need a life insurance cover.

This answers the first question, whether you need a life insurance cover or not.

The next question which comes in mind is, “How much insurance cover”.

Well technically there is no formula to calculate the actual need of the life insurance cover. It depends on the requirement of your family members and your income.

Let’s understand this with examples:

• Raghav has a family of five members. Father, Mother, Wife, one baby and himself. He earns 20000/- a month and able to maintain an average lifestyle. All other family members are dependent to him financially. In this case Raghav will need a good amount of insurance cover so that the insurance amount may help his family to stand on their own after him. I would say he needs at least 25 to 30 Lacs of insurance cover.
• Sanjay has the same number of family members and he earns the same amount of money 20000/- a month. But his father was in a government job and getting a pension of 15000/- a month. His wife is also working as a school teacher and earns 10000/- a month. So in this case, the family members are not fully dependent on Sanjay financially. But his own earnings help his family to maintain a good lifestyle. I this case Sanjay may choose to have a lesser amount of Insurance. Let’s say 10 to 15 Lacs. As he knows his family is already standing on their own and insurance cover will not be the only source of money after him.

Most importantly, if you have enough savings or secure assets which are sufficient to look after your family after you, well you do not need insurance.

I hope I have answered your second question now you can easily decide how much insurance you need.

Which plan should you go for?

Selection of insurance plan fully depends on your future plans. All insurance plans have the same concepts of insuring the earning member of the family and paying the nominee in case of any miss happening. But all plans have different feature to cover your future plans.

Your financial adviser may guide you better on selection of plan as it varies individual to individual.

I personally believe that Term Insurance is the only insurance which fulfills the real insurance need. It offers very low premium with very high insurance cover. You can pay 2-4k annual premium against 20-30 lacs of insurance cover. Actual premium may vary according to your age, income and insurance cover.

Targeted insurance plans are also good option like, child plans or pension plans. But all other option comes after term insurance. If you have a family to look after and you want to make sure they should live a good life even after you are not there, go for term insurance first.  

Which company should you choose?

All the private and government insurance companies operating in India are regulated by a government regulatory body known as IRDAI. IRDAI stands for Insurance Regulatory and Development Authority of India.

All insurance companies operate according the terms and conditions regulated by IRDAI and any insurance plan offered by insurance company is fully checked and approved by IRDAI.

Technically it does not matter which insurance company you have chosen. But insurance is a part of service industry. So, it is very important to check the history of the level of service provided by the companies. It is advisable to go for big brands. If you have heard about any settled claim in your relatives or friends, you can also choose the same company as you already have the service experience. 

I am listing few well known brands below:

Government: LIC of India is the only government undertaking company in life insurance industry. Has a good reputation and have good number of branches even in rural areas in India.

Private: HDFC Standard Life, ICICI Prudential, SBI Life, Max Newyork Life, Bajaj Allianz, Kotak Life, TATA AIG, Birla SunLife and there is a long list.

How can you get insured?

It’s very simple, just call your financial adviser or walk up to any insurance office. All you need is an address proof, photograph and date of birth proof. In case your insurance cover is more than 10 lacs, you may need a copy of your income proof like copy of salary slip or your Income Tax return copy.

Do not forget to discuss your future goals with your adviser and answer all his questions related to your financial status. It will help him to choose the right product for you.

Thank you.

Disclaimer: Insurance is the subject matter of solicitation.

For all your financial needs, call Mr Sanjeev Chawla +91-9810582989.