Life is unpredictable. The pandemic has shown us that things like death in the family, illness, accidents etc., can seriously derail a family’s well-being. The emotional loss is irreparable, but the financial loss can, to some extent, be recovered by having sufficient insurance. As a young investor in the early stages of career, it is understandable that your work is your principal focus. However, buying the right insurance can give you much-needed peace of mind and help you carry your work responsibilities more efficiently. This article explains some must-have insurances that every young investor should buy without delay.
#1: Term life insurance:
This is the most important. Suppose you have people in your family who depend on you financially. It is your duty to protect their interests by buying proper life insurance. We recommend pure term insurance because it is a pure risk cover and hence is very affordable. Don’t fall into the trap of ULIP plans, endowment and guaranteed return type insurance plans, and with-return-of-premium (WROP) based term insurance plans. It is essential to analyse the amount of insurance cover correctly. It should be enough to pay off your existing loans and help create a corpus for your financial goals and an income stream to meet the family’s monthly expenses. Insurance is a contract of utmost good faith. Ensure you fully disclose any existing medical history in the proposal form else your claim can get rejected. Don’t forget to inform your spouse and family members of the insurances that you have purchased for them.
#2: Mediclaim Insurance:
A hospitalisation can quickly drain your financial savings given the soaring medical costs in the times we live in. Hence, it is essential to cover all members of the family in a mediclaim policy. The amount of coverage should be in line with the medical costs in the city you live in. You can buy separate mediclaim insurance for each family member. If you are on a tight budget, you can go for family floater insurance. Take care to check the policy’s coverage and the insurance company’s reputation on claims processing before signing on the dotted line.
#3: Personal Accident Insurance:
Many people are not aware of this insurance and confuse it with mediclaim insurance. Personal accident insurance pays you a fixed amount in case of death, permanent total disability (PTD), permanent partial disability (PPD), and temporary total disability (TTD). The standard coverage also includes coverage for accident hospitalisation, transportation of mortal remains, education allowance for children, etc. Suppose you have an accident where you lose a hand. So, this insurance will pay a flat amount (as per policy terms and conditions). You can use that amount to pay for any recurring medical expenses and invest it to earn an income that compensates for the loss of earnings due to this disability. The premium for this insurance is very cheap, and you can cover all members of your family in this insurance.
#4: Home Insurance:
When you buy a home, it becomes probably your most significant investment, for which you spend several years paying hundreds of thousands in EMI payments. But spare a thought and think – one earthquake and your house, all your effort is in rumbles. Your entire investment can go to waste, plus you continue to remain liable for the balance amount of the home loan. To take of this risk, you can buy insurance that covers your house’s structure and contents. Insurance is an indemnity-based contract that shall cover only the actual loss that you suffer. Hence, in case of a loss, the insurance company shall pay only the prevailing construction cost of the house and not its market value. Even if you live on rent, you should consider buying only the contents portion of the insurance.
#5: Motor Insurance
It is compulsory to buy insurance for third-party motor liability in India as per the Motor Vehicles Act, 1988. However, the purchase of a vehicle also comes at a cost. Apart from the basic cost of the vehicle, you also pay additional charges like accessories, taxes, etc. Hence, you must also purchase your own damage cover that covers the cost of the vehicle and additional costs mentioned above. You can also consider add-ons like zero-depreciation, electrical and non-electrical accessories coverage, CNG Kit coverage, 24*7 roadside assistance, towing facility, engine protection cover, personal accident cover for co-passengers etc.
#6: Cyber Liability Insurance:
With the rising trend in cyber fraud and the growing number of digital transactions, it is imperative to buy cyber insurance. This insurance protects you from a financial loss due to such events. There has been a rise in the demand for these policies during the pandemic. People are working from home, and almost everything has gone online. The policy covers malware attacks, phishing, e-mail spoofing, identity theft, IT theft, media liability claims, cyber extortion, etc. Any person who is over the age of 18 years can buy this policy. Watch out closely for coverage and sub-limits. Also, make sure to exercise all proper precautions relating to digital behaviour even after buying the policy.
It is a wise approach to proactively identify the risks in your life and take proper insurance covers to help minimise the financial loss. Otherwise, one single event can destroy your years of meticulous financial planning and savings in one single stroke. Risks are dynamic in nature and change as per changing conditions and life events, so the risk assessment is not a one-time affair. You need to periodically check your risk exposures and update your insurance coverage to keep all your bases covered to the maximum.
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