A 5-point Personal Risk Protection Checklist

Insurance Products can be confusing for most people, and it's quite common for policy buyers to make mistakes that can end up costing them quite dearly if and when they encounter a dreaded moment of reckoning. Make sure you’ve got these five points checked off when it comes to your personal risk protection portfolio.

Your Motor Insurance policy has a Zero Dep add-on
For most people, renewing their motor insurance policy once a year is nothing more than an exercise that involves shopping around to zero into the cheapest option possible. Most policy buyers don’t give a second thought to the actual features of the plan they’re buying. However, it would be a very wise move for you to add a Zero Depreciation cover to your motor insurance policy, despite the increased cost. That was, if an emergency were to strike, you’ll be reimbursed in full by the insurer instead of being paid only the depreciated value of the parts that are getting replaced.

You’ve got your own Health Insurance policy, irrespective of what your company provides
Your present employer might have you covered in their group Mediclaim, but you still need to consider buying a Health Insurance plan for yourself. The most companies provided coverages have an inadequate quantum of Sum Insured attached to them. Also, remember that you’re only covered as long as you’re employed with your company – so if an emergency strikes while you’re in between jobs, your finances may take a deep cut. Also, you may find it difficult to find a good policy that suits your needs when you retire from your job. It’s best to have a comprehensive Mediclaim in place and to renew it each year in a disciplined manner.

Your Health Insurance Plan doesn’t require you to co-pay or impose disease wise caps
Though you may have purchased a policy with a cover of Rs. 5 Lacs, your insurer may have incorporated a feature called ‘disease wise capping’ which might restrict the maximum payout for a specific set of illnesses to say, 1 Lakh. Make sure you know which ones these are. The higher the cap, the better it is for you. Similarly, some Health Plans will mandate that the policyholder needs to a percentage of the total expenses. This feature is known as ‘co-pay’ and is a clear disadvantage. Ideally, your Health Insurance plan should impose neither a co-payment clause nor disease wise capping. You may need to trawl through the fine print to zero in on a health plan that fits your needs, but it would be a worthwhile exercise in the long run.

Your Term Plan has a high claim-settlement ratio
Oftentimes, different Life Insurers will charge different premiums for the same coverage amount. You may be tempted to jump in and purchase the cheapest policy. However, this move may prove unwise in the long run, since the additional premium may be the price you’re paying for a higher probability of your death claim being honoured – that is, a higher “claim settlement ratio”. Make sure that you look through IRDAI’s claim settlement ratio data for the past three years and put the premium differentials into perspective before you sign above the dotted line.

Your cumulative death benefit takes into account your income, liabilities & goals
If you’re like most people, you’ve likely not given much of a thought to the precise quantum of term insurance cover that is adequate for you. In other words, purchasing term insurance becomes a clinical exercise for most. Here’s what you need to do – add up 10 years of your current, post-tax income to the value of your outstanding liabilities (home loans, car loans and the like), and now add the future value of your critical financial goals too (such as your child’s education or securing your spouse’s retirement in your absence). Prima facie, this might sound like a steep amount – but it’s a cost worth bearing in order to secure your family’s future against unforeseen risks.