General insurance provides financial protection against unforeseen events.
Having a robust financial plan is crucial to secure your future and protect your assets. While investments for retirement and child education often get the most attention, adequate insurance coverage is equally important in one’s financial planning.
General insurance, which includes health, vehicle, travel and other policies, provides financial protection against unforeseen events. It helps hedge against major risks that can derail your financial stability.
Here are some key reasons why general insurance must be an integral part of your financial plan:
Protect Health and Assets
Health insurance safeguards you from the financial burden of medical expenses in case of hospitalisation or critical illness. A basic health plan is a safety net covering hospital charges, surgeries, ambulance fees, etc. More comprehensive policies also include out-patient treatment costs as well as pre and post-hospitalisation expenses. Having health insurance is especially critical today, considering the rising costs of quality medical care.
Similarly, vehicle insurance is legally mandatory and protects against liabilities from damage and theft. Companies like ACKO General Insurance provide comprehensive motor insurance policies that cover your vehicle against damages, theft, and third-party liabilities. When travelling locally or overseas, travel insurance provides financial aid in case of trip cancellations/flight delays, lost baggage, or medical emergencies.
Mitigate Risks
General insurance covers you against various risks, such as accidents, thefts, natural disasters, legal issues, etc. It provides protection from events that may occur rarely but lead to substantial damages when they do. For instance, your home may never experience flooding, but even a single incident can destroy everything you own.
Having adequate general cover as part of your financial plan ensures you do not suffer long-term setbacks due to such eventualities. It helps mitigate risks that can undermine your financial stability.
Tax Benefits
Several general insurance plans offer tax benefits that help reduce your overall tax burden. The premium paid qualifies for tax deductions under Sections 80C and 80D. Even the payouts or claims received are tax-exempt, subject to certain limits.
For instance, purchasing term insurance allows you to avail of tax benefits under Section 80C of the Income Tax Act of 1961. You can claim deductions up to ₹1,50,000 annually on the premium paid to maintain your term life policy. However, to claim this deduction, the premium amount should not exceed 10% of the sum assured. So, a thoughtful premium-to-coverage ratio allows you to maximise savings while getting adequate life cover.
Peace of Mind
More than the financial benefits, general insurance provides invaluable peace of mind. It allows you to feel secure knowing that your family, health and assets are protected if challenging situations arise. This helps you focus on other aspects of life and financial planning without worrying about potential calamities.
Having adequate insurance coverage gives you the confidence to pursue career goals, business ideas, investments and other ambitions without fear of losing everything in case of mishaps. It enables one to enjoy life to the fullest.
Evaluate Carefully
Choosing the right general insurance policies to meet your needs requires careful evaluation of things like:
- Coverage: Assess policy inclusions, exclusions, and limits and get adequate protection.
- Claim Settlement: Review the claim settlement ratio and the insurer’s experience.
- Premium: Compare premiums across insurers for the same coverage. Consider discounts.
- Add-ons: Evaluate optional covers like hospital cash, OPD, recovery benefits, etc.
Review and Renew
Once you purchase adequate general coverage, ensure you review policies annually and renew them in time to enjoy continuous protection. Also, update the covers as life stages and asset values change over time.
Conclusion
The bottom line is that general insurance should be integral to your financial plan. It provides comprehensive risk cover for health and valued assets at relatively low premium costs. Evaluating needs, buying adequate protection and renewing policies regularly ensures your finances remain secure.
(India CSR)
