In India most employers have a generous life & health insurance cover for their employees. However is it good enough? Are employees over cautious when they purchase a separate personal cover? On one hand there are several government and manufacturing industry employees who don’t switch jobs because of the retirement benefits, medical and insurance cover provided by their employers, while there are so many fresh graduates who don’t pay any importance to these perks (if they even do exist).
The issues with employer insurance are:
1. It is not enough. An adequate cover should take take of the entire present value of the family’s obligations (debt, housing, kids education, medical, food etc.) less the accumulated (or inherited) assets. A single blanket cover is often not good enough.
2. What happens if you loose your employment status due to a a prolonged illness/disability which renders you unfit to continue to perform your official duties. Hence this privilege/perk of insurance is revoked?
3. It is not portable. i.e. the benefits cease to exist when you switch companies (voluntarily/ involuntarily) , your employment status changes from full time to part time etc.
4. It is not guaranteed. It is considered as a perk and the company could change the cover/suspend the policy at its whims. Even most reputed company often switches between insurance providers or the fine print terms/restrictions on the insurance. This puts your long term risk coverage goal at a risk.
Hence it is often advisable to supplement your employer paid insurance with a personal cover of term insurance. Also medical bills due to prolonged illness/critical care often ruins even the best planed finances. It is advisable to have a separate rider to cover for the situation where the breadwinner starts to drain the family’s equity.