Insurance Planning is a very crucial part of financial planning. Listing down your goals and investing for them assumes you will have a constant flow of income to save for them. However, various variables constantly affect your income and well-being. You shouldn’t ignore the possibilities of mishaps or unforeseen events, ultimately putting your goals and finances in a precarious situation. Unexpected events like the sudden passing of an earning member or medical emergencies can dent a massive hole in your finances, as the pandemic has proved.

Insurance Planning helps you take care of the financial uncertainties that may arise in your life, which can either derail your goals or put your finances in disbalance. Below are some of the essential steps you can take to protect yourself and your family.

• Life insurance should be at the crux of your planning, and an adequate life cover protects the dependents from the financial shock brought upon in case of the death of an earning member. Pure term life insurance cover is the most appropriate choice for this. They are cheap and provide very high cover, supporting the family and its goals adequately if appropriately utilized. The sum assured is paid to the family members only upon the insured’s death. 

The amount of cover can be decided by two methods: Income Replacement and Need-Based Approach. The Need-Based approach aims to replace the present family expenses of the dependents. At the same time, the Income Replacement seeks to replace the current income available to the family. Both approaches take into account any of the present uninsured liabilities. You can either consult your financial planner to arrive at this figure or take a cover of at least10-12 times your annual income.

• No one is alien to the fact that medical expenses are significant and will only inflate further with time. Medical treatments are unexpected most of the time & cost a lot and with a lack of efficient & inclusive state-sponsored infrastructure for low-cost medical treatments buying health insurance is even more essential. Different health policies available in the market are family floater, individual policy, senior citizen, and critical illness policies. Family floater policies are adequate as health insurance as they provide an umbrella cover to the entire family at a cheaper cost.

A young & healthy family can effectively meet its health insurance needs with a sum assured often lakhs as long as topped up regularly. The treatment cost is paid directly to the hospital by the insurer in case of a network hospital or reimbursed otherwise.

• Critical illness and accident cover should be supplemented with these policies. Critical illness policies can be availed as a rider to health policies, while accident cover is available as a rider in both life and health policies. Critical illness policies cover major critical illnesses like cancer, Kidney Failure, Myocardial Infarction, stroke, etc. At the same time, accident cover ensures accidents, injuries, temporary and permanent disabilities.
• Although it’s mandatory to have a third-party liability cover for all vehicles in India, comprehensive motor insurance isn’t compulsory. Getting vehicle insurance will not only cover third-party liability but all other financial losses that may arise, like damage to the car, personal injury, theft, etc.

These bare minimum steps can go a long way towards a healthier financial life and provide your dear ones with the love and protection they deserve.

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- Nischay Avichal