If you can insure for as much as the cost of your car, you can surely insure the cost of your life based on your earning potential as well as the needs of the family," says Kamal Bhageria, 47, self-employed chartered accountant. Not that it's an earth-shattering revelation. All of us know it, but few care to actually follow it. Bhageria is different, and has practised what he preaches. He has Rs 50 lakh life cover that includes a key man policy for his company, a contingency cover against fire/flood for his office, adequate cover for his car, medical insurance for his family and insurance for his home.

Tragedy strikes without warning, so it helps to have adequate cover. Take Edward Fernandes, for instance. Now 51, Fernandes, an erstwhile supervisor with a private company, met with a road accident eight years ago, and after being in coma for two months, was rendered completely disabled. His endowment policy, coming when he had 16-odd years of working life left, got him an annual pension equivalent to 10 per cent of his sum assured of Rs 2.5 lakh. For someone who has been tragically wrenched away from earning opportunities, that's a great help, something that his wife, Ela, a government employee, acknowledges: "Though the pension he gets is not really enough to run a household, it at least takes care of his expenses." In addition, he will receive the sum assured at maturity, without needing to pay any more premiums.

KAMAL BHAGERIA, 47, self-employed chartered accountant Wife ALKA, 42, housewife Son ANKUR, 18, student Daughter NEHA, 13, student

INSURANCE BRIEF: Bhageria has Rs 50 lakh life cover, which includes a key man policy for his company, contingency cover against fire/flood for his office, cover for his car, medical insurance for his family and insurance for his home. He believes this takes care of his future needs, provides security to his family and gives him peace of mind.

For most Indians, insurance policies are viewed as tax-saving instruments. Which explains why, despite insurance premiums accounting for 2-3 per cent of the country's GDP, India lags far behind developed economies such as the us in terms of per capita insurance spend (see Not Enough). Not that you shouldn't save on your taxes; it's just that taking insurance purely for tax-saving reasons leaves you with the very real danger of being under-insured, and under-prepared for unforeseen contingencies. And insurance, being an investment like any other, requires a comprehensive strategy, right from the time you start your working life.

Insuring Life

The ideal time to start life insurance is when you start earning, as insurance is a cover for lost income. That's because: one, the premiums are low in term covers, and two, premiums are lower when you are younger. "At a younger age, savings are less. Hence, protection of income comes first," says Sanjay Tripathy, Head (Marketing), HDFC Standard Life Insurance. And since insurance policies are generally for several years, the premium, which stays constant through its term, provides better value over the long term.

And how do you know how much cover you need? Says V. Rajagopalan, Chief Actuary, icici Prudential Life Insurance, "Broadly, between age 30 and 35, the insurance should be up to 15 times the annual salary. As age advances, say 45-50, this multiple could be up to eight times." Also, according to Rajagopalan, after 50 years of age, the insurance needs of a person change dramatically from life cover to medical cover. It's also a good idea to go in for health riders in the product you choose, as it can add weight to any medical insurance you have, which may not be enough to cover certain ailments given the accelerating cost of medical services. "A critical illness rider on an endowment policy, for example, provides protection against critical illnesses like major organ transplants, valve replacement surgery, bypass surgery and cancer," says Pratish Sohni, an insurance advisor with a private insurance company. Also, a rider with an accident/disability cover not only waives off future premiums (in the event of an accident), it also provides 10 per cent of the sum assured annually for life, helping in providing that extra money to tide over financial troubles.

EDWARD FERNANDES, 51, formerly supervisor with a private firm, road accident victim Wife ELA, 43, government employee Son STEVE, 15, student Daughter SARAH (seen above), 13, student

INSURANCE BRIEF: In coma for two months after a road accident eight years ago, Fernandes recuperated partially, but was left completely disabled. That's when his endowment policy came in handy. Besides not being required to pay further premiums on the policy, which will continue to be in force till maturity, the insurance company also granted him an annual pension equivalent to around 10 per cent of the sum assured for his lifetime. Though the pension does not cover all his household expenses, it does account for his basic requirements.

Covering All Corners

Your life, however, is not the only thing that needs to be insured. There are other contingencies that you need to be prepared for as well. "Illnesses, thefts and accidents can set back a family's finances a lot, so spending Rs 10 per day on insuring yourself against them is worth it," says Kamesh Goyal, Managing Director, Bajaj Allianz. That you can do through general insurance products, which are designed to cover tangible assets (motor vehicles and homes) as well as intangible ones (medical insurance and accident cover). You can also insure against accidents or other problems while undertaking overseas travel, whether on business or on vacation.

General insurance policies are typically short-term in nature with an expiry period of (up to) one year. Here also, timing is important. Says Antony Jacob, Managing Director, Royal Sundaram Alliance Insurance: "Ideally, insurance should be taken as soon as tangible assets are acquired." That means, for instance, if you are buying a house, go for home insurance as soon as you take possession of the property. For a house worth Rs 40 lakh, the annual premium works out to Rs 2,841, which is just about Rs 7-odd a day.

And if you've taken a loan for the property, be sure you have a home loan cover, which provides for loan repayment in case of untimely death. The indicative premium is Rs 500 per lakh for a healthy male of around 35 years of age. Vehicle insurance is common in India, where your car gets insured once you buy one; of course, you have to remember to renew it every year.

Then, there's the health aspect. Changing lifestyles have made Indians more susceptible to lifestyle diseases, and this increases the necessity to go in for medical insurance at the earliest possible age. The annual premium for a health cover is around Rs 1,500 per lakh for a 19-45-year-old male. Also, if you're into regular international travel, it's safer to be backed up by travel insurance, since medical treatment abroad is an expensive proposition and so are situations like loss of passport or baggage. Travel insurance offers cashless hospitalisation, and treatment for accidents and illnesses during a visit abroad for individuals up to 70 years of age. An amount of around Rs 1,100 can get you a comprehensive single-trip cover for $50,000 (Rs 22 lakh) for a 15-day trip anywhere in the world.

There are other insurance products too that could be useful: wedding insurance (cover against cancellation/ postponement of a wedding, burglary during marriages, etc.), payment of housing loan instalment due to loss of job, and cover for pilgrims during holy pilgrimages such as Amarnath Yatra.

How much you spend on insurance-both life and non-life-obviously depends on your disposable income, as well as lifestyle. A general assessment is made by Rajagopalan of ICICI Prudential Life Insurance: "Insurance should be around 25 per cent of the total annual savings, to be reviewed once in three to five years till the 30s, and more frequently as age advances." Despite the obvious low level of insurance in India, Royal Sundaram Alliance's Jacob is optimistic: "There is significant under-insurance in the country that will be corrected as the economy grows and matures." Your objective should be to look beyond tax benefits for insurance products, and chalk out a lifelong plan to ensure that life's vagaries inflict minimum discomfort on you and your family.