Life can be unpredictable, but planning your finances can help smoothen that journey and protect you and your loved ones against uncertainties. At its core, financial planning incorporates a thorough assessment of your goals and dreams, and ensures that these dreams are protected irrespective of unforeseen limitations that may arise.
A healthy plan involves assessing your financial data and its patterns, and is monitored and reviewed on a continuous basis to keep you on track to achieve your goals. Further, one cannot emphasise enough the core element of the financial planning process that involves securing the future of the people who matter most to you; your family.
Term insurance: It is the most fundamental form of insurance that provides financial protection in the event of demise of the policyholder. It is the fundamental baseline for any financial plan, as it is cost effective and provides coverage against unforeseen events of life. You should always review your term plan and protection needs every few years in the light of new milestones of life. For example, when you have a child, your cover should be increased accordingly to protect the financial future of your child in the case of demise of the policyholder. A term plan should not be looked at not only to protect your present lifestyle, but to cover your future aspirations as well, which may change with promotions at your job or expansion of your own venture.
While a term insurance should form the foundation of your financial plan, insurance providers are offering a variety of other products that help create a comprehensive protection plan for you and your dependents. Why is this important? Life’s complications and events can create financial situations that, without a sound insurance coverage, would be significantly difficult to navigate.
Health insurance: Medical treatment is expensive. With the stress of modern-day life, medical emergencies and complications can create a financial burden on you and your loved ones. This cost can create a significant imbalance and calls for a health insurance plan to provide coverage for the period of recovery.
These insurance products go beyond a health plan that covers medical bills; they provide coverage for procedures and treatments as per your needs. Think of the significant financial burden of a complex ailment where costs can be unpredictable and last for a number of years. A situation like this could lead to high levels of debt for you and your family and the need to sell or mortgage your assets.
The health insurance plan is designed to cover the high costs associated with hospitalisation, including pre and post hospitalisation and inpatient care, and safeguard you.
Dread disease plan: A dread disease life insurance plan can provide comprehensive coverage in the case of critical illness including cancer, cardiac arrest and paralysis. An example of a coverage plan by a major insurance provider includes 20 per cent of the cover paid and future payments waived if detected at an early stage and full cover paid and additional 10 per cent as income for five years if detected at a later stage. The plan normally provides coverage for you until the age of 75.
Riders & base insurance: Riders are add-ons that provide benefits over and above the advantages of your base plan. The accidental dismemberment rider can provide additional benefits in case the impairments from an injury causing the irrecoverable loss of sight in both eyes, amputation or loss of hands at or above the wrist, amputation or loss of feet at or above ankles and other defined cases.
The critical illness rider benefit is available for coverage for the first incidence of one of the specified critical illnesses and is provided once in your lifetime. A term rider provides an additional death benefit in case of death.
Credit life insurance: It is good to consider if you have taken a major loan and want to protect your family from its burden in case of your demise. The face value of the policy is related to the value of the loan and coverage of the policy can reduce as the loan reduces with time. The plan offers the benefits of protection from defaults wherein the insurance provider pays the outstanding loan amount, safeguards banks and institutions against non-performing assets, and protects your family from loan liabilities.
While there are a variety of products and plans to enable you to traverse the risks and events of life, it is crucial to consider your unique needs, and those of your loved ones, and find policies that are best suited for you.
(The author is senior director and chief financial officer of Max Life Insurance)