There is conspicuous confusion amongst Indian consumers amid the pandemic when as per a study at one end they are willing to give up on insurance premiums including property and other insurance and at the other end given the covid 19 mental health and financial woes, they are the second most active in the Asia Pacific region when it comes to considering insurance purchase.
But insurance is just one component of the person's finances and besides it there are other obligations which one has to meet and if you have failed the Covid 19 time and experienced salary cut, job loss and was the sole bread winner for your household, the situation could be really hard on you. And in this what comes as a savior is your years of savings or contingency fund which though shall not disrupt your other financials.
So, with minimal resources at hand there can also be a case as to what you should service first your debt EMIs or your insurance premiums such that the insurance covers remain in force:
Now we will discuss the issue, as what can serve you best in such a situation:
Relief extended by the government as loan moratorium and extension in insurance premium payment
As the economic activity came to a standstill due to the coronavirus led lockdown, the centre as a good step allowed loan moratorium where EMIs can still be paid after six months i.e. after August and also considering the lockdown IRDAI also allowed payment of premium even after the due dates without any penalty.
But as situation unlocks and there is known that loan moratorium comes with it own cost i.e. there can be a chance of interest being charged on deferred EMI payments (case under consideration by the Supreme Court) and extended loan tenure, individuals who have liabilities to take care of i.e. both insurance and loan EMIs to service in a situation of cash crisis are worried lot.
Personal finance experts suggest paying insurance dues first and taking moratorium after due consideration
So, when you have to choose between clearing your loan EMIs and servicing insurance premiums, you should give priority to insurance and for the time being can consider the loan moratorium taking into due account all of its financial implications.
All the more in such an awful situation when despite all your alertness and precaution when you or your family member will have to deal with this Covid 19 you never can ascertain. So, best will be to have adequate health and life insurance coverage. And if you are the sole bread earner then it is indeed a must.
The call made here is because a policy in a lapsed condition in an event when there is some untoward incident will fail your years of efforts and time put into it.
Loan moratorium can be taken care of by pre-paying additional in comparison to what has been deferred
This said we mean that you opted for loan moratorium EMIs it is obvious that your interest will accumulate for the deferred time which can be as per your choice and then there shall be increased loan repayment tenure, but this can be tided over by pre-paying more than this deferred amount say 120% of the deferred amount within a period of one year. This will reduce the impact of the debt repayment that you have probably deferred due to cash crisis.