Insurance Basics: Term Life and Health Cover Explained Simply
Insurance protects the people who depend on you. Learn the difference between term and other policies, how much cover to think about, and the fine print that matters.
Insurance is the part of money planning that nobody likes to think about, and it is the part that matters most when something goes wrong. A medical emergency or the loss of an earning member can wipe out years of savings. Insurance moves that risk to a company, in exchange for a premium.
The two policies most people need
Term life insurance
Term insurance is pure protection. You pay a premium for a fixed number of years. If you die during that time, your family receives the sum assured. If you survive, nothing is paid back. Because there is no savings part, premiums are low.
- A common rule of thumb is cover of 10 to 15 times your annual income, adjusted for loans, family needs, and goals.
- Buy it early. Premiums are lower when you are young and healthy.
- Keep the term long enough to cover until your dependants can support themselves.
Health insurance
Health insurance pays for hospital costs. Medical expenses can rise fast, and one hospital stay can use up your emergency fund.
- Buy your own policy, even if your employer provides one. Employer cover ends when you leave the job.
- Consider a family floater for a young family, or separate policies for older parents.
- A top-up or super top-up plan can raise your cover cheaply.
What to read in the fine print
Waiting periods
Many policies do not cover certain conditions for some time after you buy. Pre-existing diseases have a waiting period, which IRDAI rules cap, so check the number in your policy.
Exclusions
List of what is not covered. Read it.
Room rent limits and co-payment
These can reduce what you receive if you choose a costlier room or hospital.
Cashless hospital network
Check that nearby good hospitals are included.
Claim settlement record
Look at the insurer's track record, not just the premium.
Free look period
After you receive a policy, you can review it and cancel for a refund within a set period, IRDAI says up to 30 days, minus small charges.
Be honest on the form
If you hide an illness or habit such as smoking, the insurer may reject a claim later. Under IRDAI health insurance rules, after 60 continuous months of coverage, a claim generally cannot be denied for non-disclosure, except for proven fraud. But do not rely on that: disclose everything truthfully from the start.
Steps to choose well
List your dependants and loans
Work out how much they would need.
Compare policies on features, not just price
Use the insurers' own documents.
Buy directly or from a trusted source
Check that the seller is registered.
Read the policy document
Not just the brochure.
Tell your family
They should know the policy exists, where the papers are, and who the nominee is.
Review every few years
Update when your life changes, such as marriage, children, or a new loan.
What most people miss
- Endowment and investment-linked plans mix insurance with investment. They usually give lower cover and modest returns. Understand the costs before you buy.
- Keep premiums paid on time. A lapsed policy gives no cover.
- You can complain to the insurer first, and then to the Insurance Ombudsman if you are unhappy with a claim decision.
