A new year is an opportune time to stress-test one’s insurance portfolio for resilience. In the past three years, individuals have been tested on risks from health, climate, travel, property, and even investments at some point. One should prepare for more of such ‘vibrancy’ in the new year as well. Here, we note four points in an insurance portfolio that can further bolster the protection element.

Documentation in check

A new year checklist can be a good starting point for policyholders to take stock of insurance portfolio. Updating nominee (where applicable) and contact details is part of crucial checks, which can be accompanied by checking the premium payment status as well. An effort to automate the same can also be beneficial.

Updating PED (pre-existing disease) is part of policyholder commitment when signing up for health insurance. Any health-related developments that need to be informed to the insurer must be ensured — for a ‘healthy’ health insurance policy.

Updating family members is just as important in insurance. The new year update or a reminder on existing policies and their documents is a useful exercise. A digital version of the same can be much more useful to all related stakeholders. The discussion could also shed light on any upgrades required in insurance, in the coverage or the family members included.

Supplementing health insurance

In most cases, health insurance is being served by the organisational covers or health insurance offered at the workplace. The new year could be a good point to start a health policy for self that is independent of the job/career.

A health policy offered as part of employment is designed with employment in mind, the tenure, or the cover. The employer coverage rarely extends beyond ₹5 lakh as these are the ailments one is likely to return to work from. Despite ₹1-crore covers costing only marginally higher, the serious nature of the underlying ailment restricts the coverage in employment-based insurance.

A large-cover health insurance that is paid for by yourself and covers 20-30 years irrespective of employment status is a very essential policy to have.

Home, car and travel insurance

This new year, one should resolve to plug any gaps in protection of house and car as these are the frontline victims from climate change impacts. Several cities are witnessing damage to property from untimely rains, flooding, inundation, or other disasters — at increasingly closer frequencies.

Home insurance is applicable for tenants or house owners through content or building-plus-content insurance, which covers earthquakes, fire, floods, storms, inundation, and landslides. A building of ₹1 crore and contents upto ₹20 lakh would cost ₹3,000 to ₹5,000 under different insurers.

The insurers also assess past risks in a Pin Code within a city. So insuring properties at the earliest before the occurrence of any episode is critical.

Similarly, a comprehensive car insurance protects against natural calamities, including flooding. The caveat — limited cover for engine damage from flooding, and that too under the supervision of the insurer. But for much more focussed protection, specifically from flooding, an engine protection rider may be necessary since it extensively covers engine replacement in case of damage. This is much higher in scope for coverage compared to normal own damage covers.

Travel insurance seems to be relegated to an optional purchase as Covid wanes. But travel insurance covering medical, baggage, carrier, and legal-related risks is a one-stop shop to counter most travel-related risks. With costs of ₹1,000 to ₹2,000 per trip, and wide coverage, travel insurance should be a constant companion in all travels starting from the new year.

Insurance is not investment

Despite the comfort, the new year resolution should include a vow not to combine insurance with investment. With sophistication in both fields that caters to a variety of preferences, clubbing the two is best avoided in the new year.

Insurance should protect and investment should help attain a goal. A combination product will dilute the two and end up risking two important financial goals with one purchase.

Also, investment plans similar to that of insurance (life insurance plans’ fixed return component) are competing with government yields that are 100-200 bps higher. Similarly, the insurance offered by pure protection plans (term plans) provides a cover of 20-50x annual income and at a reasonable cost. The efficiency of either can be lost in combination.

While a few plans, including retirement or funding plans, are appropriate to specific individuals, only a comprehensive risk-return matrix can support the need to combine insurance with investment.

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