The importance of sound insurance cover

While we wish for a fun and smooth life without accidents, illnesses or damage to our property, sometimes the unexpected can happen at the most unlikely of timings. These unexpected misfortunes can destroy our lives or even the lives of our relatives.

While we cannot predict the future, we can prepare for any setbacks that may arise. One of the best ways to do this is to purchase appropriate insurance coverage to cover you financially for any mishaps or illnesses that fate may throw at you. You can also apply for suitable insurance for your family members.

So insurance is necessary as it helps to increase your financial burden in case an unfortunate accident should happen. It also eases the financial burden your family has to bear in the absence of insurance. Insurance is therefore an essential part of your financial health. The key is to select the right insurance plan for your various financial needs.

This article takes a look at the main types of insurance coverage you can look for for your respective needs.

Life insurance

Life insurance policies pay out a sum of money to your beneficiaries (usually your family members) in the event of your death. This is especially important if you are a major breadwinner of your family and your family depends on your income for their daily expenses.

Term Insurance

Term life insurance pays a sum of money to your beneficiaries in the event of your death, but this arrangement is only enforceable for a certain period of time (e.g. 5 years or 10 years). Term life insurance is therefore a temporary policy that you can use to supplement your life insurance policy.


Annuities are usually beneficial for retirees or the elderly. Annuity plans pay out regular income (usually on a monthly basis) that retirees or the elderly can use to cover their monthly expenses. Some annuities have payouts that last until the death of the individual. A good plan, especially if you are expected to live a longer life in retirement, as the average lifespan of people in developed countries (and many developing countries) increases statistically with each generation.

Riders with disabilities

Pays an amount of money to cover your medical bills and hospital bills in the event of disability (for example, as a result of an accident). Disabled riders are usually created as an “add-on” to your life insurance policies.

Critical Illness Riders

Pays an amount of money to cover your medical and hospital bills in the event of a critical illness. Critical illness riders are usually created as an “add-on” to your life insurance policies.

Investment-linked plans (ILPS)

This policy is a hybrid between a life insurance plan and a mutual fund (aka unit trust). A portion of your premiums can be used to fund a life insurance plan and a portion of it can be used to invest in a mutual fund of your choosing. Sometimes income from your mutual fund can be paid out or used to buy additional units of your life insurance policy to increase your insurance coverage.

See also  Term life insurance vs. whole life insurance - which is better for you?

Capital funds or savings plans

These are savings plans that usually require you to save an amount monthly or annually. Under this plan, you benefit from interest given by the insurance company and can cash out your savings with interest after a predetermined term. This is a good plan to have if you are saving for your children’s college tuition that will be spent in a few years.


Selecting the right financial plan is essential because it will provide you with coverage that is right for your needs and the needs of your family. So it is vital to understand the different types of insurance products listed above before taking out any insurance plan.

About the author