COVID-19 Pandemic: Here’s How Life and General Insurance May Help Your Family

The second wave of COVID-19 has wreaked havoc in India. To make matters worse, experts are speculating that India might face third and fourth waves of COVID-19 just as some of the countries in the west are experiencing (or have experienced). The times like these call for individuals to be well-prepared to tackle emergencies. 

The second wave has already proved to be more devastating than the first wave and has forced many Indian states to enforce lockdown restrictions. Unfortunately, several thousands of people have been infected, requiring critical medical care, while some have lost their lives to the virus. 

It is a well-known fact that hospitalisation in the modern world is a costly affair, and may see people spending their life savings to settle their bills. Many families have lost their dear ones, with some being breadwinners of their respective families. When the sole earning member in the family dies, it pushes the lives of their dependents to the dark.

The second wave of COVID-19 has reiterated the importance of availing of suitable insurance policies. With the right general and life insurance policies by your side, you can keep hefty hospital bills at bay and provide your family members with financial security. You might wonder how life insurance differs from general insurance and how they help families amid the COVID-19 crisis. 

How does general insurance help families?

General insurance in broad terms is a contract between the insured and the insurer under which the insurer pays out the sum assured to the insured when they face a financial loss covered under the policy terms. Health insurance is a type of general insurance, which offers cover to the policyholder against medical expenses. 

By purchasing the right health insurance policy, you will avoid paying for the hospitalisation as it would be covered under the policy. You have to include all your dependent family members under a mediclaim policy. The premiums paid towards such policies would be nominal as compared to their sum assured. 

Medical inflation in India is on the rise, and the COVID-19 pandemic has only made it worse. To receive quality healthcare, you might have to spend a fortune, which can be avoided by purchasing a medical insurance policy. You will not have to worry about running into a financial crunch, as most medical expenses will be cared for by your insurer. 

While most employers offer group insurance, it is recommended to purchase a private one, as the group insurance cover may not be sufficient. Now that multiple family members are being infected at a time, it would be best to have two active health insurance policies. 

If you are not covered under any health insurance policy yet, it is advisable to avail of a policy covering at least the treatment for COVID-19. Many insurers have launched exclusive policies on the back of the COVID-19 pandemic. You have the liberty to choose the sum assured and the policy term while the premiums payable are reasonable. 

Availing of the right health insurance policy is sure to help families preserve their life savings and avoid breaking their investments for medical needs. Also, it would give you the peace of mind of being protected against running into a financial crisis arising due to a medical emergency. 

How does life insurance help families?

A life insurance policy is a contract between the policyholder and the insurance company. The latter promises to pay the sum assured of the policy to the nominee if the policyholder dies within the policy term. These insurance policies offer a life cover for the insured.

Availing of a life insurance policy is recommended for all earning individuals, more so if you are the breadwinner of your family. You will get a large sum assured in exchange for the payment of nominal premiums. If an untoward incident, like the COVID-19 infection, takes your life, the insurer pays the sum assured of the policy to the nominee. 

The sum assured would take care of your family’s future expenses, and they can continue to live the same lifestyle that you are currently providing. Given the ongoing health crisis, it would be best to purchase a life insurance policy and secure the future of your dependents. You have to consider your family’s living and future expenses to determine your sum assured. 

You may consider purchasing an endowment policy. These policies are a contract that pays out a fixed sum to the insured upon surviving a predefined period and pays out the sum assured of the policy to the nominee if the insured dies within the policy term. Some endowment policies offer a payout if the insured is diagnosed with a critical illness. 

Employees working in the private sector companies enrolled under the EPFO are automatically covered under the Employees Deposit Linked Insurance (EDLI) scheme. A mandatory life insurance cover pays out assurance benefits to the nominee if the employee dies during his service.

The payout under the EDLI scheme ranges from Rs 2.5 lakh to Rs 7 lakh. It depends on the salary drawn by the employee in the last 12 months. Previously, the maximum payout under the scheme was Rs 6 lakh, and it was increased recently by the EPFO due to the COVID-19 pandemic. An employee must be in continuous employment for at least the 12 months preceding his death, and a change of employers is allowed in this duration. 

Although the sum assured under the EDLI scheme may not be significant for some employees compared to their salary, but it could be enough to prevent their family from facing an immediate financial crunch upon their death. It is not wise to depend entirely on the EDLI life cover. This could act as a supplement to a private life insurance policy. 

With the modern world being uncertain and coronavirus continuing to haunt us, it would be best for the earning individuals to purchase a life insurance policy and secure the lives of their family members. To incentivise individuals to purchase life cover, the Income Tax Act, 1961, covers life insurance premiums under Section 80C. 

Conclusion

The COVID-19 pandemic has shown us the importance of purchasing the right general and life insurance policies. Individuals should review their insurance and opt for a top-up if needed. The primary purpose is to secure the future of dependants and protect your life savings and investments. 

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in