FOR EXISTING POLICY
FOR NEW POLICY
Life insurance is the best possible way to protect yourself and your family against the uncertainties of life. While the inevitable cannot be avoided by any means, one can prepare to deal with the consequences with the help of a life insurance policy that provides risk coverage.
While driving a car, you can be very careful on the roads and abide by the law. However, there can be a hundred other drivers who do not care about the road laws and can cause accidents. So, if you ever get into an accident, you may suffer injuries, but if you wear a seatbelt, the chances of injuries become a lot less.
Insurance works similarly. If you are hit by an uncertainty in life, like sickness, hospitalisation or death, your insurance policy will pay the bills or compensate for the loss. Similarly, if you insure your car and it meets with an accident, the insurance policy will pay for the repairs.
As you can see, a life insurance plan and other general insurance policies are basically risk cover policies.
If you want to know more about insurance policies with risk cover, the risk cover policy details, and how to choose the best risk cover policy, keep reading this blog.
What is a Risk Cover Policy?
To understand the risk cover policy meaning, you have to understand what insurance means.
An insurance policy is a contract between the buyer and the insurer. The contract says that the insurance buyer will pay a premium to the insurance company, and the latter will ensure risk coverage. This insurance can cover risks to personal life as well as articles, buildings and trades.
How Does the Risk Cover Policy Work?
In simple words, if you buy a life insurance policy with risk cover, you will get a monetary return if you succumb to an untimely death during the policy term. If you, as the policyholder, fall victim to an accident and become disabled, the insurance will cover that risk by paying you an agreed-upon sum.
Insurance policy with risk cover is not only limited to human life, but you can also buy insurance for your cars, bikes, homes, buildings, properties, businesses, and factories. Almost everything associated with some risk can be covered with an insurance policy.
You can even insure your foreign trades operated through the marine route using a marine insurance cover.
Types of Risk Cover Policy
Several types of insurance cover different types of risks. Some insurance plans cover personal risks in life, some cover risks in business, and some insure cars and bikes. These are categorised under general insurance and life insurance.
General insurance comprises motor insurance, home insurance, fire insurance, travel insurance, trade insurance, etc.
On the other hand, life insurance includes disability risk cover, critical illness cover, retrenchment cover, and lastly, death cover.
How to Choose the Right Risk Cover Policy
Purchasing an insurance policy with sufficient policy coverage is important. We have listed a few pointers below that can help you get the right risk cover policy:
For Life Insurance Risk Cover Policy
- Analyse Your Annual Income: If you are buying a life risk cover policy, you must analyse your annual income and policy tenure to determine the sufficient sum assured. It is crucial to choose the right sum assured because it can act as your family’s income in your absence. Ideally, the right sum assured should be 10 times your current annual income.
- Take Inflation into Account: In the last couple of years, daily essentials have become more expensive. Therefore, while 10 times your annual income may sound like a lot of money, you need to factor in the inflation to determine the sum assured.
- Mind the Premium Amount: The higher the sum assured, the higher the premium. So, if you choose a high sum assured, you have to ensure that the premium is affordable. If it is not, there can be a time when you resign from continuing the policy.
- Consider Your Debts and Liabilities: If you owe money to others, this debt liability may befall your family after your untimely death. Therefore, a big chunk of your sum assured may go directly to the debt payment, leaving very little for your family. It is important you consider the debt quotient as well while figuring out your sum assured.
- Calculate Your Assets and Investments: If you have sufficient savings and investments for the future, you may not need a high sum assured as your life insurance risk coverage. You can opt for a lower sum assured at a lower premium. You also do not have to opt for a high-risk cover. On the contrary, you may need a substantial sum assured if you do not have any savings or investment.
- Future Obligations: Do you have any future obligations like a child’s marriage or education? If yes, your sum assured should be able to cover those expenses as well as suffice the day-to-day household expenses.
Among all these pointers, policy tenure plays a crucial role. For example, if you are nearing retirement and buying a life insurance policy that will continue for 30 years, the investment may not make much sense. Also, opting for a high sum assured can cost a higher premium, and with retirement approaching, the high premium amount can add to the financial burden.
For General Insurance Risk Cover Policy
Commercial or business insurance may sound a lot different from personal insurance, but the basic functionality remains the same. It also covers the damages or threats caused to the insured. Therefore, following the same ideas mentioned in the preceding header can help you choose the right amount of coverage.
You must determine the value of the product and its depreciation rate. If you are insuring an establishment that costs ₹10 crore today, you may have to factor in its depreciation and inflation values. Another important factor is the value the establishment adds to your business.
For example, if you are running your business from a factory that costs ₹10 crore today, the sum assured for that establishment should be a lot higher than the current value. It is because any major damage caused to the building can hamper your business and your cash flow.
Benefits of Risk Cover Policy in Insurance
- Having the best risk cover policy can help you during any unprecedented time. Whether your consignment on the sea gets affected or your shop catches fire, you will get reimbursement for your losses.
- Further, life risk coverage in a life insurance plan covers critical illnesses and disability. It also covers retrenchment, where if the policyholder loses their job, the insurance will pay an amount equivalent to the salary for the next few months until the policyholder gets a new job.
- Not to mention, there is a death benefit where the family of the policyholder gets the sum assured if the insured dies within the policy term. It is a financial instrument that can look after your family even after your death.
