In order to plan an insurance first of all we need to identify what is it actually and why do we need it and how to plan it? Let's first understand what is insurance. An insurance is basically a contract between the insured and the insurer to provide protection against certain risks in life such as theft, illness, untimely death of the sole bread earner of the family, accident etc. For availing an insurance policy one needs to pay a fixed amount of money to the insurer called the premium.
Why do we need insurance?
Insurance has a host of benefits:
Overcome an unforeseen incident-Disasters are unpredictable. An insurance policy basically helps us in providing some sort of protection against certain disasters for instance a life insurance policy could provide financial assistance in times of the untimely death of the sole bread earner of the family, an auto insurance helps an individual to bear the financial loss occurred due to an accident, health insurance plans helps us to meet any medical emergencies, travel insurance makes our travel safe and tension free, home insurance could help us protect our homes from man-made as well as natural calamities.
Insurance as well investment- Some insurance plans have dual benefit in them. Apart from providing insurance some insurance plans have also an investment feature attached to them. This allows the insured to inculcate in them the habit of saving.
Plan a better future - A child insurance plan, Money back plans, retirement plans or pension plans, endowment plans help an individual to plan their future in a better way. The child plan would help an individual to plan the child’s education, marriage etc. retirement plans would help an individual to have a better life after retirement, money back plans may help an individual to repay a loan, buy an asset etc.
Tax benefits- Insurance policies also come with tax benefits. For ex. the premium paid towards life insurance is eligible for tax deduction under section 80 C of the IT Act. Health insurance premiums are also eligible for tax deduction under section 80 D of the IT Act. Almost every insurance plan comes with some tax benefit, be it life insurance, health insurance, auto insurance etc. .
Planning insurance is not an easy task. Some points that one must keep in mind while selecting an insurance plan are as follows:
• Selecting the right type of insurance:
The first and foremost thing that one needs to consider while buying an insurance policy is that one must select the right type of insurance that one needs. One may need a life insurance policy, a health insurance or a home insurance policy etc.
• Avoid taking unnecessary policies, as purchasing the wrong policy would not be a profit but a total waste. As having a wrong policy would mean having a wrong type of cover which would not be of benefit as well as wastage of huge sums of money.
• For instance if one goes for having a life insurance he/she must be clear enough whether it would be of any benefit or not. After taking this decision one should decide what type of cover and term does one needs and what are the premium amount that would help them get the right cover. An individual should be neither under insured nor over insured.
• Again, if one owns a vehicle it is mandatory to have a third party insurance cover. So before planning to buy an auto insurance one must decide what additional cover does one needs to have apart from third party insurance cover and must compare the policies of different companies before buying.
• Apart from this one also needs to plan the age when one needs to have the insurance, the right amount that one can afford as premium, the changes that one needs to make in one’s insurance plan as time passes by etc.
The individual also needs to be very careful about the policy cover as well as the company from where he/she is planning to buy. It is better if one compares the features of different companies before opting one.