GENERAL INSURANCE 
General Insurance comprises of insurance of property against fire, burglary etc, personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc. Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft etc. The non-life companies also offer policies covering machinery against breakdown, there are policies that cover the hull of ships and so on.

A Marine Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. Personal insurance covers include policies for Accident, Health etc. Products offering Personal Accident cover are benefit policies. Health Insurance covers offered by non-life insurers are mainly hospitalization covers either on reimbursement or cashless basis. Liability Insurance covers such as Motor Third Party Liability Insurance, Workmen’s Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor Vehicles Act. There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. For instance, there are package policies available for householders, shop keepers and also for professionals such as doctors, chartered accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones.

Life Insurance
Life Insurance is a contract between you and a life insurance company, which provides your beneficiary with a pre-determined amount in case of your death during the contract term.

We always want the best for our family and life is full of uncertainties. There is an ‘IF’ in ‘LIFE’. Hence planning for the contingencies and taking concrete steps to secure our family’s future is of utmost importance. For there is no way to ascertain as to when one might lose the ability to provide for them due to disability or the sudden loss of life.

Insurance Planning is one of the most important pillars of Financial Planning. This is because Life Insurance is the only tool which can fulfill financial commitments in case of untimely death of the bread earner of the family. Thus having an appropriate life cover is important.

Why Insurance Planning is required?

Increasing liabilities:
People today prefer to take loans to fulfill their needs, instead of waiting to save for the future. Hence, in your absence, your family needs to take care of this loan

Nuclear family structure:
Earlier, people could depend on their extended joint family system to take care of their near and dear ones in case of their absence. However, the share of families with more than 5 members has come down from 64% in 1990 to 56% in 2005 and is expected to decrease further.

Increasing lifestyle diseases:
People these days are prone to many diseases as a result of which the longevity of life is also reduced. Thus it gets important to take an appropriate risk cover and give your family a financially secure future.

Loans & Liabilities:
Insurance policy also helps to cover up ones loans and liabilities. The house one buys for our shelter, we would never want to let it go. Thus an insurance policy can help one to cover the loan liabilities.

How much Life Cover should one take?
Calculating how much life insurance you need is one of the most important financial decisions you will ever make. It should never be an isolated decision depending only on how much of a premium you can afford.

Life Insurance needs can be calculated in the following methods:

Income Replacement Value (Rule of Thumb)

This is one of the basic methods of insurance calculation and is based on your current annual income.

Insurance needs = annual income * number of years left for retirement.

Lets say your annual income is Rs 5,00,000. And you are 45 years old with 15 more years for retirement.

In this case your insurance cover equals Rs 5,00,000 * 15 = Rs 75,00,000.

Another way in which income replacement works is to multiply the annual income by 10 (also known as Income Replacement Multiplier).

Human Life Value (HLV):
This method of calculating life insurance is based on contribution that one makes and would have made to her/his family in case of sudden demise. So HLV is defined as the present value of all future income that you could expect to earn for your familys benefit. It also includes other value you expect to contribute, less personal expenses, life insurance premiums and taxes through your planned retirement date.

So if your age is 35 yrs old, your annual income is 20 lacs and your personal expenses are 5 lac. Assuming inflation rate of 5% p.a. and that you plan to work till 60 yrs, your HLV will be ` 2,21,97,963.

Total Needs Approach:
In this method, you can assess your needs -- and the needs of your loved ones -- and make a calculated assessment. The most critical factors are the number of dependents you have and their needs. Other major factors to consider are:

• Loans
• Kind of lifestyle you want to provide to your family 
• Provision for non-working spouse who would no longer get an income
• Childs education
• Child’s marriage
• Providing for financially dependent parents
• Special needs
• Dreams and aspirations such as contributing to charitable causes
• Once you determine the above factors, you run the following calculations:

Lump sum needs on Life to be Insureds death

• Home loan payoff
• Car loan payoff
• Childs education
• Childs marriage
• Emergency fund post death

Monthly income needs

• Monthly expenses
• Income of Living spouse in case she earns, or rent or interest
• Shortfall = (a-b)

Shortfall is a-b. Suppose, expenses are Rs 50,000 and spouses income is Rs 30,000 post tax, then shortfall is Rs 20,000 (50,000-30,000).

• Monthly income needs till child turns 21 or is self-sufficient:

• Number of years to go: For the child to reach 21 and post that for the spouse till her age of 80 or 90 years

• Annual income needs: Of spouse, children or dependents

• Total income needs: Of spouse, children or dependents

Sum up the current invested assets and current life insurance cover. Now see how much this total differs by what you have calculated above. This will be the shortfall (considering that you die today) that you will need to get covered. But do note that invested assets exclude residence, car and other personal assets.

When to start for your Insurance Planning?

Look at the table below:

It shows the premium amounts that an individual at different ages would pay for a risk cover of Rs.1 Crore for 20 years.

Age Annual Premium

25 9700

30 11050

35 14750

40 22025

45 34375

50 56625

There is a difference in the premium amount if you take insurance at later ages. This is because the probability of diseases is larger at high ages and mortality is high.

HEALTH INSURANCE 
Health is wealth... as the common saying goes. Health is the most important thing for any individual and therefore planning well for it becomes important.

Why is Health Insurance necessary?

• Medical emergencies can strike anytime to anyone unexpectedly, so to handle these unforeseen contingencies health planning becomes necessary

• Due to heavy cost involved in good medical care, ones savings get exhausted in heavy medical expenses and with rising cost it can get worse.

• Also due to changing lifestyles of people due to long working hours, lack of exercise, stress levels, bad eating habits etc, the immunity system gets weakened and thus the chances of illness gets increased.