5 Basic Insurance Policies Everyone Should Have

Millennials love to live in the ‘now’. To them, the uncertainties of life hold a mysterious appeal; one that should be allowed to unravel by itself. While this idea is enthralling and fascinating, what happens when the people or things precious to you are at stake? What do you do then?

Granted that it is impossible to know what’s to happen in the next moment, but you sure can be prepared for any situation life throws at you. And what better than insurance to keep you and your possessions protected when stranger tides hit you! With the right combination of insurance policies, you can always be assured that your prized possessions as well as earning power is protected.

Top 5 Basic Insurance Policies in India

So, without further ado, let’s look at the five types of basic insurance policies that you must have!

1. Life Insurance

If you have a family or any other dependents (aged parents, spouse, children) having a Life Insurance policy is a must for you. A life insurance policy acts as a safety net for your dependents if you are no longer around to take care of them (that is, in case of your demise). For the betterment of your dependents, it is crucial that you have a good life insurance policy insured with an adequate sum so that it can make up for the loss of income in the family and act as a financial repository for your family/dependents.

However, before you buy a life insurance policy, make sure you calculate your annual income, consider salary hikes and inflation, and also the total number of years you wish to dedicate to serve at a job.

2. Health Insurance

With every passing day, the cost of healthcare is soaring high, so much so that even a single visit to the doctor can add up to a massive bill. And if serious injuries/accidents/diseases are to be considered, treatment at a standard hospital can cost you a ton of money. In light of this situation, it’s only wise to have a health insurance policy.

When you are covered with a good health insurance policy, you can opt for the best quality treatment for yourself and your loved ones without constantly worrying about the money. Although maintaining a health insurance policy can sometimes be a burden, but then you have to remember that not having one is going to cost you way more.

Read More:- How to Choose the Best Health Insurance Plan

3. Personal Accident Insurance/Disability Insurance

The fact that you never know what accident might befall you is reminder enough that you should be insured against any and every odd situation that may come. So, it is advisable to invest in a personal accident policy/disability insurance policy. These insurance policies are designed to offer financial assistance in case you meet with an accident that renders you incapable of working either for a short period of time, or for an extended period, or maybe never. This plan can cover all kinds of disability - temporary, partial, and total disability.

4. Homeowner’s/Renter’s Insurance

While a home insurance policy protects your home against damage and theft, a renter’s insurance policy is for people who do not own a home and live on rent. These policies are designed to cover for any damage (for instance fire, theft, etc.) in your own home or rented apartment/house.

With a homeowner’s insurance, you will also be covered for the replacement of your home’s structure and its amenities including the cost of living elsewhere as long as the repair process continues. These two criteria are the most important factors when it comes to choosing home insurance. 

Also Read: Benefits of Life Insurance

5. Automobile Insurance

The Motor Vehicles Act 1988 of India mandates that one must have a third-party liability cover for all the vehicles that run on public roads in the country. For instance, if ever you are involved in an accident and in the process, someone is injured, you can be dragged into a lawsuit which can get ugly and make a huge dent in your pocket. Such instances can be avoided with automobile insurance.

Here are the types of car insurance available in India:

• Personal injury protection - This insurance covers all medical expenses for both the driver and passenger injuries.
• Liability - This insurance covers damages including bodily injury and property damage liability, and any damage inflicted on others and/or their property.
• Collision - This insurance covers the cost of damage to a vehicle regardless of whose fault it is.
• Comprehensive - This insurance covers liabilities for injuries and damages to others caused by your car and it also protects you against any financial losses.
• Uninsured/Underinsured motorist - This insurance covers for your losses if an individual who hits your car does not have any insurance cover or sufficient insurance to cover for the damage caused to your vehicle.
• Car theft insurance - This insurance covers and protects you against car thefts. It is highly recommended for individuals who own high-value and posh cars.

The market is flooded with a host of basic insurance policies, each of which promises unique features and benefits. However, it is advisable that you tread this path slow and steady. If you are new to the game, you should begin with the basic insurance policies and build up additional coverage slowly over the years. Also, while purchasing insurance policies, it is extremely important that you read the policy terms & conditions carefully and fully understand the benefits different policies offer. With this in mind, you’re good to go!

Insurance Policy Related FAQs 

• What Is the Cash Value of a Life Insurance Plan?

The cash value of a life insurance plan is the savings component available in policies like whole life or endowment plans. It serves as a living benefit and grows over time as you premiums are paid. The amount can even be borrowed against or withdrawn, offering financial flexibility, unlike term plans that only provide death benefits. However, assessing the cash value may reduce the final payout.

• What basic insurance policies should everyone have?

Everyone should ideally have these basic insurance policies: term life insurance for financial protection of dependents, health insurance to cover medical expenses, personal accident insurance for disability or accidental death, and motor insurance if you own a vehicle. These policies offer essential financial security against life’s most common risks.

• Why is life insurance important, and how much coverage do I need?

Life insurance is important because it provides financial support to your family in case of your untimely death. It acts as a safety net, helping your loved ones cover living expenses, debts, and future goals like education. The coverage amount should ideally be approximately 10–15 times your annual income or should be calculated based on your Human Life Value (HLV), which considers your income, liabilities, and future responsibilities.

• Why do I need health insurance?

You need health insurance to protect yourself and your family from high medical costs in case of illness, injury, or hospitalization. It ensures access to quality healthcare without financial stress and helps cover expenses like doctor visits, diagnostic tests, surgeries, and medications. With rising healthcare costs, having health insurance is a smart way to safeguard your savings and maintain financial stability during medical emergencies.

• How do I choose the right amount for my life insurance?

To choose the right amount for your life insurance, consider your current income, outstanding debts (like loans), future financial goals (like children's education, marriage, long-term wealth creation, or spouse’s retirement), and daily living expenses your family would need in your absence. A common method is to have coverage that is approximately 10 to 15 times your annual income. You should also factor in inflation and any existing savings or insurance policies. Choosing the right coverage ensures your loved ones can maintain their standard of living and meet financial needs even when you're not around.

• Does home insurance cover living costs if my house is damaged?

Yes, many home insurance policies include Additional Living Expenses (ALE) coverage, which helps pay for temporary living costs if your house becomes uninhabitable due to a covered events like fire, flood, or natural disaster. This can cover expenses such as hotel stays, meals, and other related costs while your home is being repaired or rebuilt. However, the extent of coverage varies by policy, so it’s important to review the terms and ensure ALE is included.

Apr 9/19

Related Articles:

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2. Understanding Life Insurance Premium Deductions

3. Life Insurance For Your Family

4. Reasons To Buy Life Insurance

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