Life and Health Cover-Two Smart Choices For Your Family

Written on Monday, November 6, 2017
By Vishwajeet Parashar - Sr. VP & Group Marketing Head

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What are you doing to be wealthy or to be financially secured in every phase of your life? In our last blog- Start Young - Start Smart we talked about the importance of early start and in the blog Start Smart Through SIP we talked about how SIP is a smart investment choice. Whatever investment product you are relying upon or whatever strong financial planning you are following, all these will succeed in creating your desired corpus only if you can continue with your habit of investing. Although there is nothing to stop you from investing but life and health emergencies are always unpredictable and it can take a big dig in your savings and investment corpus.


Thus, for complete financial security, you need to do two processes in parallel. First, you should save and invest regularly, second, you must have the protection through life cover and health cover.


Protection Through Life Cover


It is strange that life insurance becomes such an unpleasant topic to discuss. Sadly, there is no way out. We all need insurance to protect our future goals. The only exception is people with enough assets. Still, they need to ensure those assets as well. 


If your family members are dependent on your paycheck, then their financial security is there till they continue receiving the amount of your paycheck. As long as you are there, there are no worries but thoughts like "What without me" are worrisome. So, why not pay a small premium and get a life cover. At least it assures sound sleep.


And that is not the end of the episode. You should review your situation periodically to assure that you are adequately covered. For example, you should enhance the cover once you get married and still further when you have children. Every promotion and hefty increment also calls for a review, if you want to maintain the lifestyle of your family. 


The money from a life insurance policy is most useful in replacing the income that will be lost in case of the insured's death. This will protect the standard of living of dependents like the wife and young children. One way by which this can happen is by helping your dependents pay off your financial obligations like unpaid bills like those for medical expenses, credit card debt, and housing loans. Without life insurance, your other assets will have to be liquidated to honor your financial obligations. Another use of life insurance can be to provide iquidity to heirs of your estate. Life insurance policies with correctly designated beneficiaries, backed by a will can make the distribution of your estate much smoother. Last but not the least, many people like to earmark life insurance policies for life goals like children's education and retirement. While, in the past, insurance options in India weren't remunerative enough to achieve these goals, returns from insurance policies are expected to go up after the deregulation of the insurance sector. 


It is for the family’s sake. Life insurance is meant to take care of those who depend on your paycheque or income. It should also take care of all debts. The money then invested safely should take care of the needs of your family. Life insurance should be at least 20 times of one’s annual income. 
Need for Health Insurance
With the rise in the level of lifestyle-related ailments, the risk of getting hospitalized is also on the rise. To make matters worse, the cost of hospitalization is rising much faster than general inflation levels.  Unless there is a health insurance plan to back-it-up, it can be financially damaging to one’s wealth.   Buying just-about any health insurance plan may not help.  There could be a general treatment or a minor ailment requiring a few days stay or there could be a requiring monetary assurance for several months or years. A complete health insurance should take care of such a situation. To fulfill the need for medical insurance, one should, therefore, get health insurance in a way that it covers all the medical needs.  To create such a health insurance portfolio ensure that it has at least two kinds of health insurance plans – the first one to reimburse hospital expense and the other one, that would pay a lump sum to meet medical expenses. 
Premiums paid for any health-related plans are deductible under Section 80D. However, the tax benefit is not allowed if the premium is paid in cash. The premium can be for a plan for you or your spouse, children and even parents. The maximum deduction for self, spouse and children are Rs 25,000 a year and an additional deduction of up to Rs 25,000 for parents. A higher amount of Rs 30,000 is permitted for senior citizens aged 60 years or more at any time during the financial year in which the premium was paid.


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