A step-by-step guide to your first financial plan - PART II

Personal accident and disability insurance

Almost every day you will find a news story about a road accident be it on TV or in the newspapers. The stories of such incidents should serve as a reminder that the accidents can happen to anyone and that the impact of these accidents on one's working life could be huge. Some accidents could reduce your employability temporarily or even permanently. A personal accident and disability insurance policy is used to cover the financial losses arising out of accident and disability.

What you need to do before getting a policy is decide the coverage amount based on the estimated loss you may suffer because of an accident. In other words, the loss you may incur from employment temporarily or permanently because of an accident.

An average policy will cost you approximately Rs 1,500 pa for a coverage of Rs 10 lakh.

Health insurance

Most people don't think about health insurance very often, but it is the first thing that comes to mind when a loved one is sick. Under health insurance, the insurance company pays the medical bills if the insured person becomes sick and is hospitalised. Health insurance can protect a family from financial difficulties in case of severe and serious illnesses.

If you have a health insurance from your employer, ensure that it is sufficient. In some cases employers may cover the employee and not his/her family members. Moreover, these policies are not portable and cannot be individualised. Employer-provided policies cannot be transferred to another employer in case you switch your job.

Also employer-provided policies will give you coverage as long as you are employed, once you retire you may not have coverage which could prove unfortunate since it is usually after retirement that people need health insurance the most. If you plan to take a fresh policy after retirement, insurance companies will not cover pre-existing diseases at that point in time.

So though your employer provides a health insurance policy it is better for you to take a separate health insurance policy at least with a small amount of coverage.

The coverage amount of the health insurance policy needs to be decided based on your health consciousness, your family health history, and the class of hospital you choose for treatments.