Mutual Funds Dekho

What is Life Insurance

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or upon maturity of the insurance contract of the policy or after a set period.

Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.

There Are Two Basic Types Of Insurance plans

 Pure Protection: A Pure Protection plan is designed to secure your family’s future by providing a lump sum amount, in case of Death of the policy holder. Term Insurance is one of the Best ways to protect your family’s Future.

 Protection and Savings:  A Protection & Savings plan is a financial tool that helps you plan for your long-term goals like purchasing a home, funding your children’s education, and more, while offering the benefits of a Life Cover. In a protection & savings plan one needs to understand & plan about the goal by going through past yields given or benefits of the insurance product by illustrating the Insurance company in the plan.

Don’t forget MWPA (Married Women's Property Act)

The Married Women's Property Act (MWPA) is a significant legal provision in India that provides protection to married women and their children. In the context of insurance, MWPA ensures that the proceeds from a life insurance policy taken by a husband are secure and cannot be claimed by his creditors. This means that the policy's benefits are solely reserved for the wife and children, shielding them from financial hardship in the event of the husband's untimely demise.

Here's how it works:

Protection from Creditors: One of the key benefits of using MWPA in insurance is that it provides protection to the insurance proceeds from the claims of creditors of the husband. This means that if the husband faces financial difficulties or liabilities, the insurance proceeds secured under MWPA are safeguarded for the benefit of the wife and children.
Beneficiaries: Policy holder can designate his wife or children as beneficiaries under the policy. These beneficiaries are entitled to receive the proceeds of the insurance policy upon the death of the insured.
Legal Framework: The MWPA provides a legal framework for ensuring that the insurance proceeds are utilized for the intended purpose, such as providing financial security to the wife and children, and are not subject to the claims of third parties.
Tax Benefits: Insurance policies taken under MWPA may also offer tax benefits, both in terms of premiums paid and the proceeds received, will be entirely tax free u/s 10 (10D) subject to the prevailing tax laws in India.

What Is Health Insurance?

Health insurance is an insurance product which covers medical and surgical expenses of an insured individual or his/her Family (if they are covered) upto the available sum assured and bonuses if Any. It reimburses the expenses incurred due to illness or injury. It also provides the pre and post hospitalization expenses to the individual, depending upon the wordings of the policy.

Importance of Health Insurance

Medicare or medical costs are rising year on year. As a matter of fact, inflation in medicare is higher than inflation in food and other articles. While inflation in food and clothing is in single digits, medicare costs usually escalate in double digits.

With health insurance, you are assured of a more secure future both health-wise and money-wise. This makes health insurance policies critical for individuals, especially if they are responsible for the financial well-being of the family.

Types of Health Insurance

Individual Health Insurance: You can purchase an individual health insurance policy to provide cover for yourself, your spouse, your children, and your parents. These policies typically cover all kinds of medical expenses, including hospitalisation, daycare procedures, hospital room rent, and more. Under an individual health insurance plan, each member has their own sum insured amount.
Family Floater Health Insurance: A family floater plan allows you to cover your family members under a single policy, and everybody shares the sum insured amount. These plans are typically more affordable than individual plans since the sum insured is shared.
Senior Citizens Health Insurance: These health plans have been designed specifically keeping the medical needs and requirements of senior citizens in mind. Most senior citizens' policies offer additional cover, such as domiciliary hospitalization and even some psychiatric benefits. Since older citizens are more likely to have health issues, these policies may require a full medical check-up beforehand and could be more expensive than regular insurance policies.
Critical Illness Insurance: There are a number of lifestyle-related diseases that are on the rise. Health issues such as cancer, stroke, kidney failure, and cardiac diseases can be very expensive to deal with and manage long-term. This is precisely why critical illness insurance policies have been created. They can either be purchased as a rider or add-on with your regular health insurance plan or separately as their own plan. These policies offer cover for very specific issues and often provide claim payouts as a single lump sum payment after the diagnosis of a critical illness.
Top-up Health Insurance: A top-up health insurance plan gets activated only when the sum insured of your regular health policy gets exhausted. The plan comes with a deductible amount, which is opted by the policyholder at the time of buying the policy. Only when you pay the deductible amount, you can claim your top-up insurance plan. You can pay the deductible amount from your own pocket or through another health policy. However, you need to cross your deductible limit in a single hospitalization bill. Moreover, you can claim your top-up insurance plan only once in a policy year.
Group Health Insurance: Unlike individual and family floater policies, group health insurance plans can be purchased by a group manager for a large number of individuals. For example, an employer can purchase group insurance for all their employees, or a building secretary may purchase such a plan for all the residents of the building. These plans are fairly affordable, but they often only provide cover for basic health issues. Employers often purchase these plans as an additional benefit for employees. Policyholders must remember that as soon as you leave your organization, your cover will be discontinued. It’s always better if one should buy a Medical Insurance in his/her personal capacity as well.

Benefits of Health Insurance

Purchasing health insurance is crucial for a number of reasons. Let's take a look at the most important benefits of our health insurance policies:

Helps Deal with Rising Medical Costs: People purchase health insurance policies to safeguard their finances against ever-rising medical costs. An accident or medical emergency could end up costing you more than a few thousand rupees. With a medical insurance plan, you enjoy cover for everything from ambulance charges to daycare procedures, making it easier for you to get the care you need to recover.
Critical Illness Cover: People purchase health insurance policies to safeguard their finances against ever-rising medical costs. An accident or medical emergency could end up costing you more than a few thousand rupees. With a medical insurance plan, you enjoy cover for everything from ambulance charges to daycare procedures, making it easier for you to get the care you need to recover.
Easy Cashless Claims: Every health insurance provider will tie-up with a number of network hospitals where you can enjoy cashless claims. This makes the entire process of receiving emergency medical care much easier. At a network hospital, you aren't really required to pay for any of the covered treatments. For all valid claims, we'll take care of the medical costs, without you having to pay for anything, except non-covered expenses and the mandatory deductibles.
Added Protection: If you enjoy cover under a group health insurance plan, you may wonder why you should purchase your own health insurance policy. Well, individual health insurance plans offer providers more and better cover than group plans. Additionally, if you happen to leave the group at any time, you risk losing the cover, which could make you and your finances vulnerable.
Tax Savings: Under Section 80D of the Income Tax Act, 1961, premiums paid towards the health insurance policies are eligible for tax deductions. For a policy for yourself, your spouse, your children and parents below the age of 60, you can claim a deduction of up to INR 25,000 per year from your taxable income. If you've also purchased a policy for a parent who is over the age of 60, you can claim a deduction of INR 50,000 u/s 80D. This limit also includes a Rs. 5000/- per annum deduction for any expenses paid toward preventive health check-ups.

Key Points to Remember when Selection/Comparing Health Insurance

Section 80D of the Income Tax Act, 1961, premiums paid towards the health insurance policies are eligible for tax deductions. For a policy for yourself, your spouse, your children and parents below the age of 60, you can claim a deduction of up to INR 25,000 per year from your taxable income. If you've also purchased a policy for a parent who is over the age of 60, you can claim an additional deduction of INR 50,000.

Sum Insured Amount
Policy premium to be paid to avail the coverage benefits
List of network hospitals and Claim Settlement Ratio
Sub-limits (if any) and Waiting Period (for PEDs)
Co-payment clause

Choosing the Right Life and Health Insurance

1. Assess Your Needs:

Financial Obligations: Consider your family's financial needs, including outstanding loans, future expenses, and income replacement.
Life Stage: Your insurance needs may change as you progress through different life stages. For example, young individuals may prioritize term life insurance, while families with children may need a combination of term and whole life insurance.
Health Concerns: If you have pre-existing health conditions, consider critical illness insurance or health insurance plans that cover specific illnesses.

2. Compare Policies:

Coverage: Compare the coverage offered by different insurers, including the sum assured, policy term, and riders.
Premiums: Compare the premium rates charged by different insurers.
Claim Settlement Process: Consider the insurer's reputation for timely, quick, and hassle-free claim settlements.
Customer Service: Evaluate the insurer's customer service quality, including response time and resolution of queries.

3. Consider Riders:

Accidental Death and Disability Benefit: Provides additional coverage in case of accidental death or disability.
Critical Illness Cover: Pays a lump sum benefit in case of diagnosis of specified critical illnesses.
Term Rider: Extends the policy term for a specific period.
Waiver of Premium Rider: Waives future premiums in case of disability or critical illness.

4. Review Terms and Conditions:

Policy Term: Choose a policy term that aligns with your long-term financial goals.
Cooling-off Period: Understand the cooling-off period, which allows you to cancel the policy within a specified time frame.
Exclusions: Review the policy exclusions to identify any limitations on coverage.
Claim Settlement Process: Understand the documentation required and the process for filing and settling claims.

By carefully considering these factors, you can choose the right life and health insurance policies to protect your family's financial future.

Remember: Life and health insurance are essential financial tools that can provide peace of mind and security for you and your loved ones. It's important to choose the right policies that meet your specific needs and budget.