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Do you have enough insurance?

By Sanjay Kumar Singh
January 21, 2021 08:54 IST
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The first and most important check you must run is to see if you have adequate life cover, suggests Sanjay Kumar Singh.

Uttam Ghosh/

At this time of the year, it is customary for people to check their investment portfolios.

A similar check should also be run on the insurance portfolio.

Changes that need to be made should be noted down and implemented right away, or at the time of renewal.

Life insurance

The first and most important check you must run is to see if you have adequate life cover.

As a rule of thumb, your life cover should equal 10-15 times your annual income.

If your circumstances have changed, you may need to change the coverage amount.

If your income has risen, bump up your cover to ensure your family's standard of living is not affected by a calamity.

If you are married or have a child, the dependence on your income has increased.

Again, hike the cover, especially if it is below the 10x threshold.

If you have taken a home or education loan, then also you need to increase your cover (by the same amount as the loan).

Sometimes, there is also a case for reducing your cover, say, if you have paid off a loan.

"Once you stop generating income, then you may terminate your term cover, unless you wish to pass on the wealth to family members," says Santosh Agarwal, chief business officer, life Insurance,

Next, check the returns from the investment-cum-insurance products you hold.

If you have a participating (traditional) plan, log onto the 'my account' section of your insurer to see how much bonus it has accumulated.

By also using the premiums paid, you (or an expert) can calculate the internal rate of return (IRR).

"If the IRR is much lower than the promised rate, make the policy paid up," says Agarwal.

This means you stop paying further premiums.

Health insurance

If you have moved from a non-metro to a metro, consider hiking the sum insured as treatment costs will be higher in metro cities.

"A single person living in a metro must have a cover of Rs 15 lakh today. Add Rs 5 lakh cover for each family member in a family floater," says Kapil Mehta, co-founder and managing director, Secure Now Insurance Broker.

Says Prasun Sikdar, MD and CEO, ManipalCigna Health Insurance: "A super top-up is a good option for taking care of medical inflation."

When a child is born, add him or her to the family floater.

"If you inform your insurer within 90 days of birth, he or she will be automatically enrolled into the floater," says Mehta.

Your current policy may have features that could force you to pay out of your own pocket, like caps on room rent, co-payment and deductible.

The price differential between your policy and other similar offerings could be high.

In all these cases, consider porting.

"Make sure while porting that the new insurer understands your pre-existing conditions and factors in the waiting period served in the previous policy," says Mehta.

Motor insurance

Ensure you have the right insured declared value (IDV).

The rule of thumb is to find out the price your vehicle will fetch in the used car market and have an equivalent amount as IDV.

Assess whether you have the right add-ons.

"If you use your car a lot, buy zero-depreciation cover and roadside assistance cover.
Those who live in areas prone to waterlogging should buy the engine protect cover.
People living in areas that witness thefts should buy the return to invoice cover," says Animesh Das, head of product strategy, Acko General Insurance.

If your usage has increased or decreased, or the area you live in has changed, add or remove add-on covers.

Feature Presentation: Ashish Narsale/

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Sanjay Kumar Singh
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