The five-point insurance guide

Choosing an insurance policy needs as much attention as choosing other investment avenues. Nikhil Walavalkar gets you started on some basics to help you make a sound decision

 WHETHER it is for protection, retirement savings or to bequeath some capital, a large section of the working population today owns an insurance policy. To make the best out of this investment, there are some factors that should be kept in mind while buying an life insurance policy.
Keep it simple
    Several policies do not make sense because by splitting the cover across policies, a buyer loses 'large sum assured discounts'. Also in the context of marketlinked policies, multiple policies mean big money spent on charges. If you are only briefly exposed to certain risks you can go for specific covers. For example, an individual who has to travel extensively for work can consider buying a personal accident policy. Besides being cheap, the policy can be bought for short terms such as one year.
Nominations
    Insurance is primarily aimed at meeting protection needs. The product must function when the insured is not around. This need is best served by the concept of nomination. Hence, the policyholder should ensure that the right person is registered with the insurance company as a nominee. All so often a policy is bought when an individual is single and single persons usually nominate either their parents or siblings. Post marriage, it becomes imperative to consider if there is a need to change the nomination. Cover yourself
    Large businesses often provide their employees with insurance covers. This is usually up to a maximum of three times the annual cost to company of the employee. Some companies also go as far as to offer an option to buy voluntary covers for their employees.
    In an age where job hopping is the norm, it becomes imperative that individuals don't depend on their employers for protection needs. The insurance cover offered by the employer may not be enough to satisfy your individual insurance needs. The risk is higher when an individual quits a job and takes a break before joining another organisation. Health insurance is important in the golden years. Idea of buying it post retirement is good, for those who have health insurance from employer if and only if they remain in good health at their superannuation age.
Buying policies for children
    In India, there are many who buy life insurance policies for their children. This is primarily done to provide for their education and marriage. However, many forget that the child does not earn for the family, and hence, it makes sense to buy insurance for the bread winner and keep the investments in his name. Parents can always liquidate their investments and provide for their children's needs. A point to note is that the policies bought on the life of a child (minor) vests in the child's name till he or she attains majority. In other words, the parents have no say in the proceeds of the policy.
Opt for loan insurance
    If you are a borrower and the lender entity offers you an insurance cover on group insurance platform, consider it. Especially if you are 45 years and above because purchasing insurance at this stage in your life becomes tougher as multiple factors come into play, such as more number of medical tests and health guidelines.
    nikhil.walavalkar@timesgroup.com