Wondering about the right insurance coverage to suit your needs? Here’s all you need to know

Though achieving financial freedom is a common goal for all, it holds diverse meanings for everyone, depending on their life-stage and aspirations. For some, it signifies the ability to cover basic needs and live comfortably without constant financial stress. Others might view it as having the means to pursue their passions and interests without being bound by monetary constraints. For a few, it might entail achieving a level of wealth that allows them to retire early and enjoy a leisurely lifestyle. Ultimately, financial freedom varies greatly, ranging from stability to abundance, and is a deeply personal concept shaped by unique values and goals.   

However, despite the varying notions, one factor remains constant - there can be no financial freedom without a sense of financial security for the future. The best way to achieve that is by investing in right insurance coverage to secure your tomorrow and that of your loved ones. If you’re still wondering what the adequate coverage is for you and where exactly does it fit in your financial planning, there are plenty of options for you.   

This Independence Day, let us help you navigate through insurance policies that must be a part of your portfolio to achieve financial freedom.

Individual health insurance policy over & above corporate policy  

While corporate insurance is a valuable perk for the working population, it falls short of providing comprehensive coverage for individuals and their families. Therefore, it must be complemented with a wholesome retail health insurance plan. In today’s era of rising healthcare costs and diverse healthcare needs, a standard corporate plan alone meant to cater to the entire workforce might not be a strong enough safety net.   

Restrictions like low sum insured or exclusion of specific advanced medical treatments can drain your finances in no time, especially if you need to avail of tertiary care, like neurosurgery or cancer treatment.   
Room rent is usually capped at about Rs 5,000 in corporate policies, which means the policyholder either needs to shell money out of their own pocket if they need a single room or settle for shared rooms only.  
These policies might have a restricted network of hospitals offering cashless treatment, and so, one would have to arrange a huge sum for treatment first and then undergo the hassle of reimbursement process if their chosen hospital doesn’t fall under the network list.  

These policies might not adequately cover your family, especially aging parents who need the most medical care. Relying only on corporate policy will translate to huge financial strain if your family members need medical attention. 

On the other hand, individual policies are designed to take care of such issues and provide extensive coverage. Equipped with high sum insured, add-ons and no restrictions, these policies will help you achieve financial freedom from medical inflation. 

Term life insurance to leave behind a legacy  

In today’s uncertain world where health issues and death no longer differentiate between young and old, the idea of leaving behind financial liabilities to your dependents is pretty scary. Ever wondered why the term insured is deemed to be the foundation of all financial planning? That’s because it provides financial protection to your dependents at a moment when you are not around to do so. The responsible step of securing your dear ones with a term life policy well within your lifetime is your path to unlocking financial freedom even in your absence. This policy will not only ensure that your dependents have a financial backing for life’s milestones like higher education, but also not let them compromise on the kind of lifestyle you would like them to have. Keeping varying needs in mind, there are different kinds of term plans available in the market -  

Pure term plan, that is highly affordable, offers high coverage like Rs 1 crore to 5 crore and comes with no maturity benefit  

Term return of premium (TROP) plans, that return the paid premiums to the policyholder upon maturity, but cost 2x more than regular plans  

Return of premium at no cost plans, that come with the one-time exit option, also return all the paid premiums but cost the same as regular term plans  

Independent homemaker term plans, that independently cover the life of a homemaker, irrespective of whether her spouse has a policy or not  

Investment-cum-insurance policies for wealth creation  

Beyond financial protection, insurance plans also serve as an excellent tool for wealth creation. Whether you’re looking to safeguard your retirement or want to accumulate wealth for your child’s education, there’s a plan out there for you. Here’s what you can invest in -   

Reap guaranteed returns at no risk: Nothing quite feels like attaining financial freedom like achieving your life’s milestones with sufficient corpus. New-age guaranteed returns plans offer a return ranging from 7 to 7.5 per cent, which is the highest rate in traditional plans. These returns are absolutely tax-free up to Rs 5 lakh annual premium. Suppose you invest Rs 20,000 per month for 5 years in these plans, by the end of 5 years, you would have invested Rs 12 lakhs. Now, in the 10th year, you can expect a corpus of Rs 20.5 lakh, which means you earn a profit of over 8 lakhs on your investment. You can also invest Rs 40,000 per month and will be eligible for a profit of around Rs 17 lakh, and still be under the tax-free limit.   

Ride on market highs with unit-linked insurance plans: Unit-linked insurance plans are for investors who are open to taking risks. Under favouring market tides, these plans have historically provided best-in-class returns that run as high as 12-15 per cent on investments. One can also allocate their funds under debt, equity or hybrid as per their preference under ULIPs. These plans also offer tax benefits up to Rs 2.5 lakhs of annual premium that result in significant savings.   

Plan your retirement with annuity: Annuity plans are a good retirement option if you consider diversifying your portfolio. They offer a well-rounded approach to retirement planning since they come with the option of immediate annuity or deferred annuity, depending on whether you want your income to start right away or later. Also, they come in lump-sum or regular a pay-out variant, which makes them incredibly flexible, while offering a guaranteed rate of return. 

Views are personal. The author is Co-founder & Chief Business Officer - General Insurance, Policybazaar.com