Are you insured enough to tackle a crisis?

Leading life is somewhat similar to driving a car. Driving a car entails preliminary checks to see if every part is working fine: the right pressure in the tyres, adequate coolant, smoothly working clutch and engine parts.

All these, backed by a full fuel tank, imply that one is in control and set for a long drive. Life similarly asks for control over various things so that we can have a good time living it.

What one earns, spends and saves in the present are not the only indicators of how well one is in control of one's financial life. To keep things under control, one should also do a good job of making provisions to meet future financial needs. Insurance is a key part of this planning. We look at provisions like health and life insurance covers in addition to those for house, home loan and car(s).

Health insurance

The right cover. Unlike life insurance, where you can figure out the right sum assured amount by using some thumb rules, arriving at an optimum health cover is usually difficult. Says Deepak Mendiratta, managing director, Health and Insurance Integrated, a health insurance consulting firm: "There are no calculations or thumb rules to arrive at a cover. However, you could look at it in two ways.

"First, check for any hereditary ailment within your family or the kind of ailments your peers or friends usually encounter and cover yourself appropriately.

"Second, see how much money can you put away every year so that a sum insured could be looked at accordingly."

Plugging gaps. You could simply buy another health insurance policy to the first one to increase your total sum insured amount. You can club the two policies to meet the hospitalisation expenses, if the need arises.

However, you can never claim an amount higher than the medical expenses you incur. A family floater is also a good way to bump up your cover. It is bought for the entire family and the sum insured opted for is available to all.

You could also top up your cover by looking at policies with benefits like critical illness plans and hospital cash plans. Since these policies pay in lump sums, they are usually designed to take care of your income stream for the period you are hospitalised.

Life insurance

Get term, get control. Life insurance is meant for those whose financial needs you would like to be met after you are no more. Review your situation periodically to maintain adequate cover.

Plugging gaps. Check on two things to identify any gap in your term insurance. The first is the coverage amount. The most important thing is to estimate your dependents' financial needs in the unfortunate event of your death. Take into account the lifestyle they are accustomed to and the one you would want for them in your absence.

A thumb rule for those early in their career is to have a minimum cover of about eight times their gross annual income. As one ages, it may be trimmed to about five times the gross annual income.

Now, check the duration of the cover. See if there is a period which is not covered. It is not right for a 30-year-old man to buy a term plan for 15 or 20 years. Buying a term plan at around age 50 is costly and there are health issues.

Unlike endowment plans, premium of term plans rises as its duration increases. However, life is uncertain and you should ideally choose a plan that covers you for long.

Term cover can be dropped easily once financial responsibilities are over. Currently, some insurers are offering term plans with coverage till age 75 or a term of 30 years.

If you have a home loan, you should take a term plan or a loan cover term plan propotionate to the home loan amount. Ideally, the plan should start with the first home loan EMI.