One of the things I said last time while discussing “Managing Finances while travelling” that I would be writing about saving while travelling. However, I feel I have missed an important topic, that of Insurance for travellers. Insurance is an essential aspect of travel that is needed to be discussed even before managing expenses
Colourful Umbrellas always at hand! Insurance against a rainy day!
In a nutshell, we can define insurance as a device that could protect us or our family from extreme unforeseen event of the negative kind. It could be financial, health, emergency or even death.
Alternately, one can term it as a risk mitigation option in return for a nominal amount paid as premium. The value of the risk mitigated is many times more than the value of the premium amount paid, for example, the term plan and term insurance premium calculator can assist you with estimating the premium based on your requirements, age and place.
Without going into further details of how insurance works, we see that there are many types of insurance coverage. There are insurance plans for individuals and businesses. We will restrict ourselves to individual travellers here.
Broadly two categories of insurance exist that are broadly termed as life insurance and non-life insurance also called general insurance.
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Life Insurance
In simple terms, life insurance is an agreement of a person with an insurance company where the insured person pays a pre-determined amount called the premium to guarantee payment of a pre-determined amount (death benefit), on his or her death, to the insured person’s nominee.
Types of Life Insurance: There are broadly two types of life insurance. One in which, if the insured person survives the term or period of insurance there are no survival benefits. Most of the Term policies and whole life policies fall under this category. The other type is where survival benefits accrue as a part of the premium invested in some form of equity or bond market which is returned at the end of the period of insurance. Endowment policies, annuity schemes, savings plan etc. fall under this category.
In India, the second type of insurance is quite popular even though the premiums are higher.
Why is Life Insurance important to travellers?
According to me, life insurance is one factor that ensures, the family of the insured does not feel the economic pinch when he or she is no longer around. It may sound morbid but it is a fact of life.
General Insurance
Health, Travel, Home, vehicle insurance etc. falls under this category.
There is a periodic or one-time payment of premium upon which the insurer guarantees payment of the agreed sum. Travel Insurance and Home insurance are perhaps, more important to us travellers, than other types.
Travel Insurance: In general, Travel Insurance covers hospitalization during travel, flight cancellations, delays and sudden change in plans, pre-existing diseases covered at no extra cost, Baggage and Passport loss, Personal Accident and Personal Liability covered and so on. Many of them also cover medical evacuation for extreme illnesses and repatriation of the mortal remains if there is an occurrence of someone’s death during travel. In fact, many countries do not give a visa if you are not properly covered. Travellers are more prone to one or more of the above situations during their travels.
However, if the traveller is involved in adventurous activities then most companies would shy away from any insurance except for a few at a high premium. I remember taking such an insurance for about 90USD for 15 days when I was out trekking to Everest Base Camp.
For travellers, I highly recommend Travel insurance that covers health and also Home insurance against burglary when you are travelling.
Home insurance
Home insurance is generally to insure against loss or damage of house due to fire, burglary, lightning strikes, explosion, flooding, rains, vandalism, and third party liability and so on.
Temple ruins at Ayutthaya. Did they have home insurance?
As a traveller, if you don’t have anyone looking after your home while you are away, this insurance is of utmost importance. It gives you peace of mind while travelling, so much so that even if there is a total loss, you are at least covered financially.
One big advantage is that the premium amounts are very low and the insurance value is often based on self declaration. One of the reason is , the probability of occurrence of the incident is a factor for calculation of premiums. Most of the incidents covered here are of very low probability hence low premiums.
Conclusion
I have covered only those types and aspects of insurance that are most important and beneficial to a traveller. This is a generic treatment of the subject. However, individual circumstances may involve different mix of solutions.
Please feel free to share your views on the subject.
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