Insurance

Protect your wealth with the right insurance coverage. Know what you need, what to skip, and how much to pay.

Insurance is not an investment — it is risk transfer. You pay a premium to shift the financial impact of a catastrophic event onto an insurance company. The goal is to protect your existing wealth and income, not to generate returns. Understanding which policies are essential and which are unnecessary can save you thousands annually.

Term Life Insurance — The Most Important Policy

Pure life insurance with no investment component. Pays a large lump sum to your family if you die during the policy term. Premiums are a fraction of traditional whole-life or ULIP products.

Coverage: 10–20× your annual income is the standard recommendation
Term: Cover until at least age 60–65, or until your youngest child is financially independent
India: Online term plans from LIC, HDFC Life, Max Life — ₹1 crore cover from ~₹800/month at age 30
US: 20-30 year term from companies like Banner Life, Pacific Life — $1M cover from ~$30–50/month at age 30
Avoid mixing insurance and investment — avoid ULIPs, endowment plans, and whole life policies

Health Insurance — Non-Negotiable

A single hospitalisation without health insurance can wipe out years of savings. Medical inflation runs at 12–15% annually in India and healthcare costs in the US are the leading cause of bankruptcy.

India: Individual plan with ₹10–25 lakh cover + super top-up for larger needs
US: If employer offers it, choose the plan with the best out-of-pocket maximum
US: For self-employed, an HSA-compatible high-deductible plan maximises tax benefits
Check: network hospitals, claim settlement ratio, no-claim bonus, pre-existing disease waiting period

Disability Insurance

Your most valuable asset is your ability to earn income. Disability is far more likely than death during your working years — yet most people ignore this coverage.

Long-term disability should replace 60–70% of pre-disability income
US: Most employers offer group LTD — check the definition of disability (own-occupation vs any-occupation)
India: Personal accident + critical illness plans together cover most disability scenarios
Look for policies that cover your specific occupation

Insurance to Skip (Or Minimise)

The insurance industry profits from policies that sound useful but have poor risk/reward ratios for consumers.

ULIPs: High charges eat returns — buy term + invest the difference in mutual funds
Extended warranties: Self-insure by keeping an appliance/repair fund
Credit card insurance: Rarely pays out — check exclusions carefully
Mortgage protection insurance: Usually overpriced vs a simple term plan
Travel insurance with credit cards: Check if your card already provides coverage

💡 Pro Tip: Buy term insurance before age 35. A ₹1 crore policy costs 2–3× more at 45 versus 30. Every year of delay permanently increases your premium.

⚠️ Important: Read the exclusions section of any health insurance policy carefully. Pre-existing conditions, specific treatments, and waiting periods are the most common reasons claims are rejected.

Key Takeaways

✓Buy term life insurance early — premiums are lowest when you are young and healthy
✓Never use insurance as an investment vehicle — returns are poor after charges
✓Health insurance with a high sum insured protects against medical inflation
✓Disability is more likely than death during working years — do not ignore income protection
✓Review your policies annually as life changes (marriage, children, mortgage)