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Insurance Article

Is Cost-effective Insurance a Myth?

December 23 2016
Cost of protection is just the tip of the savings you gain

Insurance isn’t as expensive as you think!

As per the Insurance Regulatory and Development Authority of India (IRDAI) annual report for the financial year 2014-2015, India is currently witnessing a low insurance penetration at 3.3%

This can be attributed to several myths, misconceptions and lack of awareness towards the benefits of having a financial cover against risks. What’s more, insurance is looked upon as merely a tax saving instrument. This is substantiated by the fact that the number of policyholders increased during the tax season.

Lastly, it is viewed as an unnecessary expense and a costly one, that may or may not come in use. Following are the reasons insurance is not as expensive as you think:

Protection Against Risks

You are subjected to unexpected risks every day. Even if you don’t have loan liabilities and EMIs, there would be a sudden need for money in case of an emergency. These emergencies may include burglary, accidental injury, or emergency hospitalisation, for which the cost can run in thousands, to begin with.

An insurance cover that protects you from financial implications is a wise step. The benefits always exceed the premium costs in the long run, giving you the best value for your money.

What’s more, you can avail add-ons and riders that cover additional risks such as Accidental Injury, Waiver of Premium, Hospital Daily Cash, and Critical Illness. Thus, you receive an additional sum insured to further increase your risk coverage at a nominal cost.

Low Premiums

Would you believe that health insurance with a sum insured of ₹10 lakh can be availed in about ₹70 per day? Not only that but also it comes with features such as:

  • Inpatient treatment
  • Day care treatment
  • Inpatient AYUSH treatment
  • Pre and post hospitalisation costs
  • Ambulance cover
  • Reset benefit
  • Wellness programs
  • Add-on covers such as, hospital daily cash, convalescence benefit, donor expense, critical illness cover, out-patient treatment, and maternity benefit

You can even customise these to reduce the premium even further. The premium expenses vary from product to product and depend on several factors. Similarly, for other general insurance plans, you can adjust your features and benefits as per your budget needs.

Tax Exemption

While tax deductions should be the last reason to get insurance, it often is the sole reason. This means, some of us may get insured with a plan that does not factor in actual risks and leaves crucial gaps.

Which is why, it is advisable to utilise the provisions under the Income Tax Act, 1961. You can avail the following tax exemptions on your taxable income:

Case Tax Exemption
Health Insurance for you, spouse and dependent children + Health Insurance for your parents aged above 60 years + Preventive Health Check-ups ₹25,000 + ₹30,000 + ₹5,000
Health Insurance for you, spouse and dependent children + Health Insurance for your parents aged above 60 years + Preventive Health Check-ups
(Here, your age is above 60 years as well)
₹30,000 + ₹30,000 + ₹5,000

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