In the absence of adequate information, the wrong insurance plan is often chosen. Due to which the person is not able to take full advantage of the basic purpose of insurance cover, for himself and his loved ones.
Whereas, choosing the right insurance plan is essential to avoid any possible trouble in adverse situations.
Insurance cover for yourself and your loved ones
To choose the most profitable insurance plan it is important to know that what are the types of insurance plans?, What is the purpose of insurance?, What are the benefits of the plan? Etcetera.
1. Insurance Plan :
Most people choose the insurance plan not on their own but on the advice of the insurance agent or their friends. Due to which there is less risk cover at higher premiums, relatively less return on the expiry of the policy.
Insurance plans can be divided mainly in the following way –
- Term plan (Available in multiple names with different features).
- Combining savings with insurance, plans available in various names like Money Back etc.
- health insurance.
2. Insurance protection, for yourself and your loved ones , how ?
The purpose of insurance is to cover risk, not to save. Therefore, it is important to understand the purpose of insurance before taking a policy. Never link insurance with savings, while choosing an insurance plan to cover the risk.
3. Disadvantages of Wrong Plan:
As with most insurances, savings policies like money-back policies are more popular. Whereas taking such an insurance policy from an economic point of view, we remain at a loss due to the following reasons, because –
- To be insured for a relatively low amount, on the premium to be paid (low insured amount)
- Comparatively low return after the completion of the policy
- Lack of any other kind of additional facility in the same insurance premium.
For example, let us look at an insurance policy like money back which takes insurance and savings together. The premium paid for these policies is very high. In that premium, we can get insurance and other benefits of more than that from other policies.
4. Reason for Popularity of Wrong Plan:
Despite the lesser benefits of money-back policies, the reason for their high popularity is the lack of attention to it. The agents concerned take full advantage of this. Because compared to term plans, plans like Money Back offer 10 to 15 times more commission.
Most insurance agents highlight the non-refund of premium deposited in term plans. Terming this as a deficiency, let the person switch to another insurance plan. Due to this we are deprived of benefits like insurance cover, of ourselves and our loved ones.
5. Benefits of the Right Plan:
To illustrate the benefits of the right plan, here is a term plan as an example.
A term plan is purely a risk cover plan, in which insurance is kept separate from savings. Along with the risk cover, it also has a wide variety of riders, available at very low premiums. Insurance cover, in terms of self and loved ones, is the best and cheapest policy. It has the following types of risk cover –
- accidental death insurance
- Accidental Disability Insurance.
- Critical illness insurance.
- Disability Insurance, etc.
The benefits of term plans are very easy to understand. In term plans, there is a risk cover of more than Rs. The remaining money can be made the most from your money, by investing in schemes like PPF.
Read > Why take a health insurance plan?
6. Additional Features :
Different types of features are included in different insurance policies, such as –
- In term plans, after the diagnosis of critical diseases, the entire sum assured is paid all at once. It is up to you whether you will get the treatment, with which method and where, whether in the hospital or at home.
- Some term plans also have the facility of refund of the premium deposited at a slightly higher premium.
- In health insurance, along with common diseases, money is also paid for the treatment of serious diseases.
- In health insurance, the claim is paid out of the sum insured or the amount spent, whichever is less.
- In most health insurance, riders are required to be taken with them due to the absence of critical illness.
The comparative study done here is just the information given to clarify the different situations.