There are many people today who either dont think about insurance as something that needs to be managed, or who are not very aware of the policies that they hold. Then there are others who believe that simply having a health insurance policy and a life insurance policy is enough. But insurance as a whole is a murky world for the lay investor, filled with unscrupulous agents who are out to con you out of your hard earned money.

This articles aims to help you understand your insurance portfolio and identify what you really need in terms of insurance, in simple, easy to understand language.

At the top most level managing your insurance portfolio is a simple job. As you go deeper into it, you'll see its not so hard after all. Basically, the 4 main steps you need to follow are:
 

1. Know what you Need
   
   Drawing up an insurance requirement list is just like drawing up a grocery list, only with much more impact on your financial life as a whole. To avoid getting confused by the vast number of insurance types available, identify at the beginning what you are looking for. Broadly, the insurance seeker can have one of two needs a) life cover (through a term plan) or b) investment combined with life cover (through traditional endowment or a unit linked insurance plan). Although the latter sounds like the convenient option, we recommend against it. Going for this option will deprive you of the benefits of selecting the two options i.e. insurance and investment in isolation. In other words selecting life cover or investment separately is more prudent than selecting a combination of both. At PersonalFN, we maintain that over the long-term, you will be better off separating these two objectives.
   
   So basically, you need pure life cover, and health insurance (mediclaim) to start with. But remember, not everyone needs life insurance. There is a small percentage of people who dont need a term plan. If you have enough assets to cover your dependents needs in your absence for the rest of their lives, and you have no liabilities, or if you are retired, or if you are not contributing financially to the household and other expenses, you might not need a term plan at all. We'll go into this in some detail in the next point.
    
2. Quantify your needs
   
   Once you have decided why you need insurance its time to answer the question how much insurance do I need? To understand this better let's take the first scenario i.e. you want a life cover. Typically this will involve planning for all future liabilities and commitments as also setting up a contingency fund. Those familiar with the jargon know that we are referring to the Human Life Value over here. You can also assess your Human Life Value (HLV) using our HLV Calculator. On the health insurance side, you can determine how much mediclaim you require based on some practical questions and answers, such as how old are you? how is your health in general? Are you hospitalized often? What hospitals do you prefer? Based on this, you will know how much you are likely to spend on hospital stay and can opt for health insurance accordingly, and also based on other factors such as individual policy features.
    
3. Select the insurance policy
   
   As we mentioned at the beginning, one reason why insurance has turned out to be more complicated than necessary is because of the quality of insurance advice. Selling insurance as you are aware can be very remunerative. Not surprisingly, the advice is often biased in favour of insurance products that garner the highest commissions. So you have to be really sure that your insurance advisor is honest and competent and more importantly, from an honest and competent insurance company. If you can't ascertain this easily, insist on references whenever possible. Check his recommendations by asking for comparisons across insurance companies over various parameters. Understand why he is recommending one insurance plan over another. And if he is making claims that seem outlandish to you, don't hesitate to either take it down in writing from him or get a confirmation from a company official.
   
   Another problem with insurance advisors is that many of them are mutual fund agents on the side. While, this by itself does not pose a problem, clients often complain of how their insurance advisor is at times not keen on selling life insurance and invariably makes a pitch for mutual funds. The solution to this problem lies in identifying your needs. If you have decided to opt for a life cover for instance, make sure your insurance advisor gets the point. If he still insists on selling other products then its time to re-evaluate whether he is the right insurance advisor for you. At times, having sold an insurance policy, the insurance advisor is no longer interested in servicing the same. References can play a critical role in weeding out such advisors.
    
4. Conduct a review regularly
   
   Like all other long-term activities, you must monitor your insurance portfolio closely to ensure that you are on track to achieve your objectives. For instance, if you have opted for a life cover (in line with your Human Life Value), then you will have to keep a close eye on your liabilities and financial commitments. If there is a discernible upward revision, then your existing life cover may not prove sufficient and you may have to consider taking additional cover. The solution to this problem is to opt for a slightly higher cover at the outset; since pure risk plans are relatively cheap, it will not prove to be expensive.
   
   On the same lines, if you have opted for a health insurance plan that has a cover of say Rs. 3 lakhs, and you find from conversations with your friends, colleagues and families, that medical treatments have gotten a lot more expensive due to burgeoning inflation, consider going for a top up to increase your cover to say Rs. 5 lakhs.
    

Conclusion

By now you would have realised that managing your insurance portfolio isn't as difficult as it appears. Like any other activity it involves taking decisions, implementing them and monitoring the results closely. Of course, you must remember that you shouldn't depend on your insurance advisor rather you should read your insurance policy carefully. Its not hard at all and you'll be very glad that you took the time to make an informed decision.

An remember, insurance is part of your overall financial plan

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Comments
emcksbac@sovvmxdo.com Jun 17, 2012 Fred C / It is usually inteoplmce, and can vary greatly from one card to another. Very few cards give liability coverage, for instance, they usually just cover the collision damage waiver. Most of them also do not cover loss-os-use, which leaves you on the hook if they have to give you another vehicle because of a collision. You have to read the wordings the company sends you, and double-check each time you rent a car, because credit card companies can change providers at any time.I have a platinum credit card but, for the few dollars a day it costs me, I buy a separate non-owned policy for a rental instead of relying on the credit car coverage. If I rent a car for 7 days, that policy costs me $ 43.00. It gives me $ 50 deductible on all physical damages, loss-of-use coverage, and $ 5,000,000 liability on a car I rent or borrow anywhere in Canada. For $ 64.00 I can buy the same policy covering any car I rent or borrow in the US.Check with your insurance broker to see if you can buy a similar policy.
nwg@iway.na Jun 17, 2012 bestcarrentaltips / Some credit cards will cover dagame or theft to your rental car. Note: You are not covered just by being a cardholder; you must use the card to rent and pay for the vehicle. Some plans cover accidents only if the cardholder is driving, not the cardholder's spouse! While this may replace the need for CDW (Collision Damage Waiver) and LDW (Loss Damage Waiver) offered at the car rental counter, check with your card issuer to see what kind of vehicles are covered. Coverage can vary from card to card, and it can also vary based on the issuing bank or credit company that issues the card as well. Many credit cards will not cover loss of use of the rental car if it is in an accident. Loss of use is a fee that is charged by the rental company if your rental car is dagamed and is sent out for repair. You would be billed a loss-of-use fee for every day that the vehicle was not able to be rented. That can add up! The loss dagame Waiver offered by the rental car company covers loss of use. Check to see if the coverage is primary or secondary. For some companies, its’ coverage becomes primary only if you don’t have any personal collision insurance of your own. Most card issuers do not provide coverages for more expensive rentals, so it is necessary to call them to see which rental vehicles they cover. Usually they provide coverage for cars and exclude more expensive rentals such as sport utility vehicles (SUV's), luxury cars, exotic cars and vans. Coverages may also not extend to long-term rentals or rentals in other countries. Some card issuers specify that you must rent from certain rental companies. Make sure to check this requirement before you reserve your car. The bottom line is check into everything!!If you don’t need to purchase the optional coverages you will certainly save money, but only if you are truly covered.

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