Insurance Resolutions For 2013

Take note of these insurance must-dos and be mindful of them in this new year, says Jay Sampat.

Hoping to get your insurance portfolio in order in 2013? You’re not alone. A sizeable chunk of consumers will make insurance resolutions to begin the year. However, if history is an indicator, more than a third of us will fail regardless of how well-intentioned we are.

If that sounds like you in previous years, here are some tricks you can use to make sure you achieve your insurance goals this time around:

1) Lifecycle planning – When it comes to buying an insurance product, the policy you choose would depend on your age and stage in life. If you are looking at life cover and are single with no dependents, you should consider a term policy. When you are married and have kids, you can move on to buying child insurance plans or ULIPs to arrange for education funds. Simultaneously, one needs to plan for one’s retirement and can look at pension plans. Your future income, assets and ongoing loans should also influence the sum assured.

2) Health insurance is a must – While people without dependants can afford to ignore life cover, taking health insurance is a must. Buying such a policy early in life ensures that the insurer will cover all illnesses, as there are likely to be no exclusions when you are younger. Further, on most policies, you can accumulate a bonus of up to 50 per cent of the basic sum insured if there are no claims. Those with dependents can consider family floater options.

You would also do well to assess your sum assured every year to ensure that it is adequate to take care of medical costs, which keep going up over time.

3) Conserve your wealth – An accident can derail all your plans. Hence, one needs to purchase accident and disability covers in addition to life insurance policies. Opting for such covers is critical to provide comprehensive financial protection for your dependents in the event of an accident or your death.

4) Beware of last minute purchases – Insurance is a long-term commitment, and hence, you should refrain from making purchases if you don’t really need it. You should not buy life insurance policy only to save tax. After all, you need to service the premiums year after year, and should you miss these payments, the policy could get terminated, leaving you with a negligible amount. Also, steer clear of buying policies from friends or relatives just to oblige them.

5) Timely premium payment – Various life and health insurance plans require you to renew annually. So, don’t forget to renew your policies, lest the cover lapses.

Also, never assume that the policy you are renewing carries exactly the same terms as the expiring policy, as insurers may make small changes. Hence, be sure to check the terms and conditions at every renewal.

6) Buy on the internet for big savings – For the last couple of years, many life insurers have launched pure protection covers that can be bought only through the internet. What attracts buyers is the fact that these cost about half of what offline term plans do, for example, a Rs 1 crore cover costing as little as Rs 10000 a year. While earlier only three life insurers offered term plans online, this number has gone up to more than 10 now.

7) Comparison shopping – This is essential while evaluating which product to buy. Some of the important clauses to review in the case of health insurance are the renewability clause, exclusions and the waiting period. Policies with lifelong renewability, fewer sub-limits and exclusions and shorter waiting period for covering pre-existing illnesses should be preferred. Premiums should be considered only once products with similar features are shortlisted.

8) Filling the application form – Non-disclosure of vital information is one of the key reasons for claims to get rejected. Often, this happens is because individuals entrust this task to agents, who may not be acquainted with their past history. Hence, you should ideally fill the form yourself. Also, never buy an insurance policy by providing incorrect information, as this can cause your claim can be rejected later.

9) Role of other investment options – While ULIPs and pension ULIPs are highly popular, it would also make sense to consider other products available in the market. If wealth creation is your objective, you can evaluate equity-linked savings schemes (ELSS), diversified equity funds and balanced funds. If your goal is to create a neat retirement corpus, you can consider investing in the Public Provident Fund (PPF) scheme.

It takes some time to get into the habit and find what works for you. Instead of beating yourself up about past failures, consider what went wrong and adjust your plan accordingly. Don't forget to incorporate the aspects of previous plans that did work for you. Needless to say, you can also learn from the failures and successes of others.