Insurance Plan: Nowadays, people often avoid buying insurance because they view it as an unnecessary extra expense. In reality, however, it has become an essential tool for a family’s financial security. In the event of an emergency—such as an illness, an accident, or the death of the family’s breadwinner—the right insurance policy can significantly alleviate financial distress. That said, simply looking at the premium cost is not the right way to choose a policy. It is crucial to consider factors such as the required coverage amount, the company’s claim settlement record, the policy’s benefits and terms, and the actual payout you would receive when needed.

How much term insurance coverage should you opt for?

The primary objective of term insurance is to provide financial security to the family. If the family’s breadwinner passes away unexpectedly, the policy payout can help cover daily living expenses, children’s education, household costs, and the repayment of outstanding loans. Generally, it is recommended to have term insurance coverage of approximately 10 to 15 times your annual income.

For instance, if your annual income is ₹10 lakh, you might opt ​​for a term insurance cover ranging from ₹1 crore to ₹1.5 crore, depending on your needs. However, a “one-size-fits-all” approach does not apply to coverage amounts; other factors—such as your current income and the number of family members financially dependent on you—should also be considered. Therefore, rather than basing your decision solely on a multiple of your income (10 to 15 times), it is best to make a choice that takes your entire financial situation into account.

What is CSR?

CSR (Claim Settlement Ratio) indicates the proportion of claims paid by an insurance company out of the total claims received during a specific period. For instance, if a company has a claim settlement ratio of 95%, it means that out of 100 claims received during a specific period, approximately 95 were settled. While this serves as an indicator of the company’s claim-settlement performance, relying solely on this metric when purchasing a policy is not advisable.

Is a company with a high CSR the best choice?

While a good Claim Settlement Ratio (CSR) is a positive sign for an insurance company, it is not the only data point to consider when deciding on a policy. Factors such as the premium amount, policy exclusions, and medical underwriting requirements should also be taken into account.

Why might a personal health insurance policy be necessary alongside employer-provided health insurance?

Many individuals receive health insurance coverage through their employer as part of their job benefits. This is advantageous as it helps cover hospitalisation and treatment costs. However, relying exclusively on employer-provided health insurance is not always sufficient.

The primary reason is that coverage under a company’s group health policy may cease or its terms may change if you switch jobs or leave the organisation. In such scenarios, having a personal health insurance policy in your own name can be beneficial. A personal policy ensures continuity of coverage—even when changing jobs, taking a career break, or retiring—provided the policy conditions are met and premiums are paid on time. Therefore, even if you have employer-provided health insurance, it is prudent to view it as supplementary coverage and consider purchasing a personal health policy tailored to your specific needs.

What is ‘Zero Depreciation Cover’ in motor insurance?

‘Zero Depreciation Cover’ is a popular add-on option when purchasing car or bike insurance. In contrast, standard motor insurance claims often factor in depreciation—or the reduction in value—of certain vehicle parts. This means that in the event of a part replacement following an accident, the insurance company does not always pay the full cost of the part.

Under a Zero Depreciation Cover, and subject to policy terms, you can mitigate the financial impact of depreciation deductions. For instance, if a car part is damaged in an accident and needs replacement, a standard policy might require you to pay a portion of the cost out of pocket due to depreciation; a Zero Depreciation add-on can help reduce this expense.

Is Domestic Travel Insurance necessary?

If you are travelling within India, purchasing separate travel insurance for every trip is not mandatory. In the event of a medical emergency during domestic travel, your existing health insurance policy may provide coverage, provided the specific treatment and circumstances are included in the plan. However, this does not mean that domestic travel insurance is never useful.

Travel insurance can be beneficial depending on factors such as the type of trip, duration, booking costs, and potential risks. For example, if your trip involves expensive tickets, hotel bookings, a risk of cancellation, or other specific circumstances, it is worth considering the benefits and coverage that travel insurance offers. Ultimately, whether or not you need domestic travel insurance depends on the nature of your trip and your personal requirements.

What factors should you consider when buying insurance?
It is essential to check a few key aspects before purchasing insurance. For instance, choose a cover that aligns with your needs, carefully read the policy terms, understand the exclusions, and evaluate the coverage alongside the premium. While the Claim Settlement Ratio (CSR) is an important metric, do not base your decision solely on it. Additionally, check for waiting periods in health insurance and consider opting for riders based on your specific requirements.

Conclusion
The most important factor when buying insurance is ensuring the policy aligns with your actual needs. In the case of term insurance, the coverage should be based on your family’s financial requirements. While a cover amount of 10 to 15 times your annual income is often a rule of thumb, your actual requirement depends on factors such as your income, existing loans, family situation, and future expenses.

The CSR is a factor to consider when selecting an insurance company, but it should not be the sole basis for your decision. It is crucial to understand the policy terms, coverage details, and the claim settlement process. If you already have employer-provided health insurance, you might also consider purchasing a personal insurance policy tailored to your needs, keeping in mind potential job changes.