Financial independence gives a person freedom to achieve goals. Money is important for life so is protection. Insurance policies are the best protection available today. Insurance policy is a safety net that protects us from uncertainties of life. There are different types of insurance policies that every individual should have in 2020.
Read through the article to know the top 5 insurance policies in India that every person should have in 2020.
Things you need to know about insurance policy
The three important components that any person should know about any type of insurance plan are premium, policy limit and deductible.
- Premium: It is the amount you need to pay for the policy. The amount is paid at regular intervals, usually monthly, quarterly or annually. The premium amount to be paid for the policy is calculated based on the risk profile of the insured person.
- Policy limit: this the maximum amount for which a person is insured. In other terms, it can be called as maximum money that the insurer is liable for in case of loss. Generally, for higher policy limits you need to pay a higher premium. And at the same time for lower policy, the premium is also low.
- Deductible: the last thing you need to know about an insurance policy is deductible. This is referred to as the money a policyholder has to pay before receiving the claim. The money is paid out of the pocket of the insurer. High deductible insurance policies are less expensive.
Apart from the above mentioned terms, a person buying insurance should also know its types.
What are the different types of insurance policy?
The main types of insurance policies are as follows:
- Term insurance: The most common insurance policy in India is term insurance. This policy provides life cover to the insured without any returns or saving factor.
- Unit linked insurance plan: ULIP pays a sum to the insured as assured on maturity or death. But the ULIP insurance policy performance is based on the working of a market. This type of policy is a combination of both investment and insurance.
- Money-back policy: This policy is the best type of insurance plan. They pay a portion of the sum at regular intervals to the insured person. And the balance amount is paid on maturity or death. On death, the sum is paid to the beneficiaries.
Also Read: Habits that Will Help you Reach Financial Freedom
Top five insurance policies that a person should have in 2020
With the rise in a number of diseases and medical conditions, health insurance is a must. The cost of medicine and medical charges has also been increased. Bearing medical costs is not possible for all individuals. In such situations, health insurance has become a necessity. This policy can be taken out for a single individual or for family. This type of policy protects the insured person from unforeseen medical conditions.
The next important insurance that you should have is life insurance. This type of insurance protects you and your family against death. There are different types of life insurance policy in India. A person who is the primary breadwinner of the family must have this insurance. The amount received from the insurance safeguards the family from loss of income.
Disability insurance/ accident insurance
The recent government report shows that more than 2 lakhs people lose their life on the road due to accidents. As the fatalities due to accident are high every person should consider this policy. Accident policies cannot reduce accidents happening on the road. But the policy can reduce the financial burden imposed on families due to the accidents.
On the other hand, disability insurance is similar to accident policy. But they differ in terms of coverage. It provides you with a part of income in case you are unable to work due to disability.
The fourth insurance policy that is essential is home insurance. This type of policy covers the home of the insured person. It covers the home against theft and other damage. The policy coverage extends to the foundation, walls and roof of a home. But you may require additional policy or add-ons to cover against natural calamities like floods, earthquakes and wildfire.
Also Read: Important Term Insurance Riders and Their Benefits
Critical insurance policy
The last type of policy that all individuals should have is a critical insurance policy. This policy protects the insured against critical –illness like stroke, heart attack and cancer. One type of critical insurance policy pays out the sum immediately after being diagnosed. But another type of insurance policy pays only after reaching a certain stage in the illness.
Insurance policy is a must for every individual. Financial planning is complete only when it includes an insurance policy. Apart from the policies mentioned above a person may also need vehicle insurance.
Image Credit: pixabay