Customize your insurance cover

For most of individuals, insurance portfolio consists of a term cover and a Mediclaim policy. This may not suffice for an insurance cover should be taken as an effective antidote to family’s financial problem in case of bread winner’s absence adding to one’s sense of security.

Moving on with different roles from a dependent child’s to a provider’s – our needs change. To keep pace with them, we need to re-examine and improve our insurance covers just as we need to re-jig our investment portfolios from time to time

Buying insurance is subject to an individual’s needs. The focus should always be the number of dependents and how protected they are financially after his (family earner) demise. However this may be the reason for buying insurance. Some customers think of insurance products as investment too. Thus, a host of insurance plans are woven around retirement children’s education, marriage, disability, and wealth creation. The basic benefits of insurance however remain the same providing maturity benefits to a person who survives the end of the policy term, and death benefit to dependents in case the policy passes on.

As you move beyond single status you can customize your insurance cover, much as one would move into a bigger home as one’s family grows larger. This can be done by simply opting for multiple policies that cater to different needs, or buying policies of varying tenures. Going for multiple policies is a better option because you can take advantage of the latest insurance products available.

Younger people those between 23 and 35 prefer unit linked insurance plans (ULIPs). These investment based insurance schemes offer good returns. The growth prospects of the scheme are tempting especially after marriage when one begins to look beyond just me and thinks about us as the core of any plan. However, the best bet here actually be a term plan insurance plan. These work out the best if you have dependents as they are cheap but offer large cover.

Interestingly more policies are bought between September and March than during the rest of the year. This suggests that insurance plans are sought after for the tax benefits they offer. Other insurance schemes like endowment plans which yield 8% to 19% over a fixed term, are popular too. In terms of returns they may not be your best options, but if you’re a risk-averse investor, the scheme provides the safety of assured returns. However premiums for these schemes are much higher than those for term insurances plans. If liquidity is crucial go for a money back policy that pays back after specified periods. However, the returns on such plans are lower than the total premium so they may not be as good an insurance cover as an endowment plan.

With new products hitting the market, look out for combination plans – a mix of term and ULIP which give you back your premium, if not the insured amount.

The birth of a child is an occasion for joy and for additional insurance cover. Most children’s plans are as much about investment as they are about insurance. Several of them (children’s plans) keep your money locked up for a period. Depending on how long it is before your child will need the money, many schemes offer attractive savings linked or unit linked plans. These allow you to get maximum returns on the sum insured. Most schemes consider parents as policyholders and the child as a beneficiary.

A child’s education and marriage are two milestones that her parents should start working towards early in life. Many insurance schemes are designed for this. Some schemes give the child the sum insured plus full maturity benefits even if the parent passes away before the term ends and some premiums are still unpaid. Schemes that offer returns in installments over a period of time are also a good bet, since most will coincide with one’s most important educational years. The proceeds can be used to fund those.