Personal Accident
If you are a breadwinner, an accident can create serious financial problems for your family. It can ruin the comfort and security you work so hard to provide them. Just think of it, who will help them settle the financial commitments in your absence or in case of your disability to earn any more, temporarily or permanently? You need to be prepared. Arm yourself with personal accident insurance.
Personal accident insurance covers the risk of bodily injuries arising directly from an accident that was caused by external, violent and visible means and results in death or disablement.
Personal Accident: Coverage
Insurance for insurance sake
You are a proud owner of a Honda Civic. Like all proud owners you have taken an insurance policy for the car. The insurance policy is of an amount that ensures that if the car is a total loss (in an accident or it is stolen) you will get enough money from the insurance company to make good the loss.
When it comes to your life, do you take the same precautions as you did for your car? Remember, unlike a car, with your life you do not get a second chance. Have you taken enough life insurance to ensure that if you die too early your family will get a sum that will ensure that they do not have to make any adjustments in their life style? As a broad rule of thumb, you should have life insurance equal to at least 10-12 times your annual income (for a more detailed calculation of how much life insurance you should have please use the insurance planner calculator.
Most Indians just do not have enough life insurance that will satisfy the above criteria. In their defense they will claim that they cannot afford to buy that kind of life insurance amounts for themselves.
For the car insurance, at the end of an uneventful year, the renewal notice arrives in the post and you pay it. So it goes on and on till you sell that car. At that time if you have had no occasion to make a claim you consider it as your good fortune. You obviously do not rue the money that you spent on your car insurance and do not look for a return on the money spent on your car insurance. Obviously while fixing the premium for such car insurance the insurance company does not have to build in this element and hence the pricing is low.
However, most people have a very different behavior when it comes to life insurance. They still want to get something back if they do not die during the policy term. Most of us still consider insurance to be a tax planning tool and not as something that will help our family in case of our death. And when we decide to purchase insurance, we instinctively go for the "maximum bang for the buck" strategy, mixing our insurance and "investment" needs. The surging popularity of Unit-Linked Insurance Plans (ULIPs) is a classic case in point. Our instinct tells us to ask, "If I am paying this much towards my insurance, what am I getting in return?" What they do not realize is that whatever they get in return is only from what they pay. The price of any life insurance plan that provides returns will obviously be much higher than if you were to take a plan that pays out if you die (called a term insurance plan) but otherwise pays nothing (much like the car insurance).