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Ep 4: Prioritise Protection

by Money Puzzle   ·  July 10, 2020   ·  

Photo by cottonbro from Pexels

Although, logically this blog should have touched upon the nuances of investing, before we get there, one more important subject needs to be tackled.

This is the subject of insurance or your protection. There are two things which can be cleared up right away:

Firstly, insurance is not an investment and secondly, it’s never too early to get the right insurance.

The hyperlinks in the text will take you to articles on, where I have discussed both these subjects in detail. Refer to those and leave your comments on anything additional that comes to mind.

Coming back to prioritising insurance.

Here’s the thing: previously I had touched upon why you need to get insured. Insurance is a kind of protection:

  • Life insurance protects those dependent on your earnings from financial disaster in case of your untimely death
  • Medical insurance protects you from an empty wallet thanks to large hospitalisation costs
  • Motor Insurance protects you from expenses on damages to your vehicle thanks to someone else’s faults
  • Home insurance protects you monetarily from the cost of a robbery
  • Travel insurance protects you from losses and medical expenses while you are away from home


What it does is, gives you protection from sudden large expenses which can throw you into monetary distress.

In fact, there is insurance that businesses can have against natural calamities and even pandemics.

The Wimbledon tennis tournament, for example, showed extreme foresight by getting itself insured against losses arising specifically from pandemics. According to newspaper reports, it paid out roughly $32 million in premiums for an expected payout of around $142 million this year thanks to the cancellation of the tournament this year as a result of the COVID19 pandemic.

This is what insurance is all about; you pay an amount premium which is the cost for buying this protection and in the event that you need it, the pay-out is large enough to be of use.

If you are wise you will get protection at a low cost with a high pay out.

The focus in this blog will be on life insurance and Mediclaim.

Life Insurance

This is possibly the most mis-sold financial service or security. We are accustomed to the term LIC being used synonymously with life insurance and investment.

However, you will get real value from your life insurance only and only if you choose a term life policy.

Term life policy is a simple concept: You pay an annual cost to get a suitable life cover which gets paid out to your dependents. Ideally, this is calculated as a maximum cover up to ten times your current annual income. To get this cover you will have to pay a premium annually, which, is a fraction of the cost compared to the sum assured and also compared to the hefty premium that comes with endowment and money-back plans. The only difference with the latter is that you will not get back this premium paid on a term life policy, but then the amount paid as premium is also very small.

A term life insurance policy costs very little and has a large benefit attached.

Sample this: with a salary of around ₹10 lakh a year; at the age of 30, if you take a simple term life cover worth ₹75 lakhs sum assured, you will have to pay an annual premium or cost of anywhere between ₹7,000–9,000 if you are a woman and ₹8,000–₹10,000 for a man. This is an annual cost and it can vary a bit depending on the life insurer and the policy details.

This policy will be valid till you are 70 years old.  Really, it’s the cost of two Saturday night outs in a year!

The cost and the sum assured will be unmatched by any endowment or money back policy. Save that excessive premium you pay for those type of life insurance policies, instead, invest them properly. If you are married, have children and an earning spouse, then both parents must get individual life insurance policies. This is to ensure that in the event of any one spouse’s untimely death the other can focus on ensuring the children are secure without worrying about getting back to work even at the cost of losing their job; the pay-out from the insurance will provide the much needed financial security in a difficult time.

Medial Insurance

The point of having health insurance is being able to access hospitalisation, pre and post hospitalisation costs through the insurance cover at a nominal price. For a 25-year-old for example, a ₹5 lakh health cover can come at a low premium of ₹5000-6000 a year, that’s roughly ₹500 per month. 

That’s more than a reasonable amount to spend in protecting your monetary fallout from the unforeseen hospitalisation event.

Since we are living through a pandemic, you might realise that this is an important safeguard. There are insurance companies which have launched special plans for catering to COVID19 linked hospitalisation expenses. It’s not as straightforward though, you will have to look at several details before you buy such a policy, especially if you are looking for a COVID19 linked cover.

Here are some general points you need to consider:

  1. Low premium in case of medical insurance is not always a benefit
  2. Check the pre and post hospitalisation cover
  3. Check if the claim is cash less for the entire sum assured
  4. Check the policy sub limits on things like room cost, doctor fees, surgery related costs and so on.
  5. Check on specific exclusions and the waiting period
  6. Which are the hospitals included in this cover

There are certain other specific points you will have to consider for COVID linked policies:

  1. Waiting period of 15 days or lower
  2. Exclusions in case of pre-existing diseases like diabetes
  3. Valid age for the policy
  4. Materiality of travel history for claim
  5. Conditions on co-habitation with a COVID patient
  6. Maximum sum assured versus likely hospitalisation costs

Unfortunately, when it comes to insurance, the devil is in the detail and you really need to go through the document from top to bottom and also ask your agent all kinds of minor and major questions about this.

There are online resources which compare insurances and give some details, but never ever pick a policy without doing the adequate research behind it.

The Insurance and Regulatory Development Authority of India has proposed that health insurers launch a standard COVID care policy with standard terms for customers. This is meant to come into play from mid-July and it will make it simpler for you to shop for a COVID specific health insurance.  

Overall, it will help you to begin early even in your Mediclaim policy – here is why

  1. Taking a policy at an early age comes at a low premium.
  2. It gives you enough time to cover up the waiting period required by the insurer for certain specific ailments and health conditions like maternity, certain cardiac conditions and so on. The waiting period is essentially the number of months or years after you have taken the policy where you cannot claim insurance for the medical condition. 
  3. When you continue with a policy for several years, there are benefits like no claim bonus which can accrue. The chances of getting this for a policy which was started at an early age are higher.

These two are really the most crucial aspects of getting the protection that insurance offers.

Think about it, wouldn’t you rather start early when it costs little for that big benefit, rather than regret it later when you have to pay big for this little oversight!

Once you have this covered and you have your bases protected – both term life policy and Mediclaim for a 30-35-year-old individual can cost under ₹25,000 put together in a year. That’s a ₹2000 per month cost.

Delaying this makes no sense what so ever!!


Before you start thinking of where to invest, get yourself protected with the right kind of insurance. Above all get your term life policy and your Mediclaim in place – it’s cheap, it’s easy, it’s a MUST! But don’t forget to read the details with microscopic vision and don’t blindly by the cheapest policy available.


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