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Essential Insurance

Chandralekha Mukerji   Delhi     Print Edition: December 2011

For most of us, insurance means buying just life and health covers. However, risks aren't limited to life or the possibility of falling ill. Here, we bring you three other insurance covers that can ease financial stress in emergencies.

CRITICAL ILLNESS
This cover is especially important for people who have a family history of critical ailment. While a medical insurance policy covers only hospitalisation expenses, a critical illness policy makes a cash payment if the policyholder is diagnosed with any of the listed critical illnesses irrespective of whether he is hospitalised or not.

Critical illness insurance
Though the schedule of insured illnesses varies from insurer to insurer, most cover all major ailments such as heart surgery, cancer, multiple sclerosis and major transplants like that of kidney, lung, pancreas and bone marrow.

The critical illness cover is an extension of and not a substitute for the medical insurance cover. "The amount is payable once the disease is diagnosed and the insured survives 30 days after the diagnosis.

Costs such as donor expenses in a transplant surgery which are not covered by typical health insurance policies can be paid out of the amount received under this cover," says Divya Gandhi, head, general insurance and principal officer, Emkay Global Financial Services. However, you will not get the benefits if the illness is diagnosed within 90 days of taking the policy.

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Buying Tip
Ideally, a critical insurance plan should be bought with a hospitalisation policy. This way, the scope of the cover becomes wider. Suppose you buy a Rs 5 lakh health cover with a critical illness benefit of Rs 3 lakh and suffer an ailment where treatment expenses come to Rs 7.5 lakh. In such a situation, you can seek a claim of up to Rs 8 lakh, which can include all your pre- and post-hospitalisation expenses. On the other hand, if you have just a critical illness plan, you will get a fixed compensation, irrespective of the actual expense.


ACCIDENT & DISABILITY
Life insurance will take care of your family's financial requirements in the event of your death. But if you become permanently disabled, you may lose your income and will have to be provided for. For such situations you need a long-term accident and disability cover which will compensate for loss of income in such a situation until your death or the standard retirement age.

Accident and Disability insurance
Different options range from a restricted cover of death due to accident to more comprehensive plans which, apart from death due to accident, cover permanent or temporary disability and partial or total disability. While the minimum and maximum sum insured varies from insurer to insurer, the minimum and maximum age of entry is 18 years and 70 years, respectively.

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Choose a plan that provides coverage enabling you to maintain your current lifestyle even if you cannot earn.

"Sum insured under the personal accident and disability policy is calculated based on the earning capacity of the insured. Though it is almost impossible to put a value to human life, it becomes necessary to apply some yardstick to fix the sum insured so that human life is not overvalued for ulterior motives or undervalued otherwise," says Pankaj Mathpal, a certified financial planner and managing director, Optima Money Managers.

Some insurers such as Future Generali and Apollo Munich also offer a 10% discount if you include your family in the cover.


Buying Tip
An accidental death benefit rider or a temporary/permanent disability rider can be bought as an add-on with life plans at a nominal price. Go for them if you are looking for basic protection. Otherwise, buy a standalone policy for a more comprehensive cover.


HOME INSURANCE
You take utmost care to secure your house. Yet the risk of natural or man-made catastrophe always remains. To cover such a risk, you must consider a home insurance policy. A comprehensive home insurance policy covers the structure of the building as well as the contents of the house belonging to the proposer and the family members permanently residing with him.

Home insurance
Some common risks covered are fire, earthquake, flood, burglary, bursting and overflowing of water tanks, loss or damage to jewellery and other valuables.

Keep in mind that the sum assured is calculated on the basis of the reinstatement cost of the house. Therefore, the cover should be enough to reconstruct the house in case disaster strikes.

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Insurance companies usually have standard construction rates according to the location and size of your property. But this can be revised appropriately if you have used expensive material like exclusive wood, marble, etc. This will also apply if you do any upgrade work after buying the policy.

Also, insure household contents at their market price. "In case you are living in a rented house or an apartment where the building is insured by your society, you can buy a customised plan which covers only household articles and not the building," says Gandhi.

One can choose to upgrade the cover with riders such as living expenses in case of total loss, architect's fee, etc.


Buying Tip
A home insurance policy is an annual contract. However, some insurers such as Royal Sundaram General and SBI General give you an option to choose a long-term policy. In this you can get a hefty discount on the premium.



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