Life and health cover: what cover to buy and factors to consider when buying insurance

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The need for adequate life and health insurance seems to have increased in recent times. Insurance is a tool to manage the risks that arise in life. While life insurance helps maintain living standards and achieve life goals, health insurance helps avoid dipping into investments to meet hospitalization costs. Before one even starts investing for goals, there must be an adequate amount of life and health insurance coverage within the family.

The amount of life insurance coverage is shown as the sum assured and together with the bonus it becomes the death benefit. Underinsured means that one does not have enough sum insured and surviving family members may not meet their financial needs. Typically, one can consider buying life cover for 10 to 15 times net annual income, also taking into account other liabilities such as home loan.

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One must undergo a proper needs-based analysis. “Multiple factors help determine the ideal amount of coverage one should purchase. Factors such as age, financial assets, financial liabilities, annual income, lifestyle and expenses of dependents are some of the factors in deciding the amount of insurance required.It is also important to keep reviewing it every 5 years.As one progresses in life, one should regularly check their protection needs and keep increasing their coverage amount,” says Aatur Thakkar, Co-founder and Director of Elephant.in, Alliance Insurance Brokers.

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When it comes to buying adequate health coverage, the answer may not be as simple as life insurance. Several factors such as city of residence, medical history, types of hospitals in your area can help you decide the amount of health insurance coverage. “Geographical location where one resides is also considered as medical costs in Tieir-2 or Tier 3 cities are lower than in metropolitan cities. The amount of the premium can also increase if one has existing illnesses. Waiting periods for PEDs and certain illnesses also determine the premium amount. Premiums are comparatively lower for health covers with a longer waiting period for PEDs and specific illnesses,” says Vivek Chaturvedi, Direct Sales Manager, Digit Insurance.

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“Considering rising medical costs, a person may consider an insured sum of Rs 10 lakh to adequately cover themselves. They can reassess their needs and get a higher sum insured once they get married or have children. Premiums are generally higher for those with pre-existing conditions (PED) and come with a waiting period,” adds Chaturvedi.

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