One of my blog readers asked me – ‘Sreekanth, I observe that you have been publishing more articles on Insurance planning than any other category, why is it so? Why do you give so much importance to protection planning?’
My answer to this question is –
- Life has become very unpredictable. It is OK to PAUSE or to postpone your investment decisions temporarily. But it can be very risky if you postpone buying an adequate Life / health insurance cover. Being under-insured or un-insured can be financially very risky.
- We can see lot of mis-selling happening in insurance industry. So, I am trying my best to create awareness about various aspects of protection planning. If you have an unwanted life insurance policy, it may lead to both ‘wealth erosion’ and also the sum assured may not be adequate for your family to continue the same standard of living (god forbids, if any unforeseen event happens).
- Third reason is more of a personal one.
Let me give more details about the third point with two real life incidents.
- A good friend of mine has expired last week. We were involved in few real-estate deals in Bangalore. It is very rare to find a person like him especially in real estate industry. He studied till 9th standard and he is from a very very poor family background. He has no other source of income except for ‘brokerage / commission’. His wife, two kids and parents are his dependents. I had advised him a couple of times to take term insurance and also a health insurance plan for self and for his family members. He was planning to take a health insurance plan this month. But, God has other plans. He died due to DENGUE fever and kidney failure. They couldn’t afford to pay for medical treatment in a private hospital. Unfortunately, I came to know about this after everything is over as I am currently not residing in Bangalore. (May his soul rest in peace)
- Let me give you one more real life example. This incident has happened in my life. I lost my father when I was in 7th standard. He was an employee of a Public Sector Bank. He died in an accident when he was travelling in office vehicle (on official duty). He did not have adequate life insurance cover. But, the office vehicle was insured. We had received personal accident claim of few lakhs. The entire claim amount was deposited in FDs. The bank interest rates were very high during 1990’s. So, we (mother, sister & myself) could survive on these interest payments alone. We could complete our studies with this insurance claim amount only. (May be this is also one of the strong reasons why I have chosen to leave my IT job and start providing unbiased financial advice / information through my Blog ReLakhs.com)
So, anything can happen to anyone at anytime. We have to be prepared and plan in advance. (The Secret of a Financially Happy Living is to Plan for all the Known Events in your life and to Make Provisions for all the Unknown events in your life!!!)
Insurance Planning should be your top most priority
- You need to first protect ‘What you have‘. It can be your Life, Health, Property, Vehicles etc., Plan for sufficient insurance coverage and buy right products to cover the risks associated with all these.
- Earning Rs 1 Lakh per month and having a life insurance cover for Rs 1 Lakh (Sum assured) is meaningless. Buy a life insurance cover based on your earning potential.
- Have adequate life insurance if you are the bread-winner of your family and if you have dependents. Buying a Term plan is the best way to get adequate life insurance cover. It is advisable to avoid buying traditional plans like Money-back or Endowment plans.
- Have adequate life insurance cover if you have financial liabilities (home loan etc) & financial commitments (obligations).
- Do not treat insurance as an expenditure or as an investment. It is your responsibility.
- Buy independent Health insurance cover. Get your family too covered with a health insurance policy. Your employer might provide group Mediclaim till you retire. But, remember, it can be very difficult to get adequate health insurance cover as you grow older or during your retirement stage.
- Understand the importance of having a comprehensive Personal Accident cover. It is very essential to have ‘permanent disability cover’. (Read – Best Personal Accident Plans in India)
- Other insurance covers like ‘home insurance’ or critical illness insurance are also important based on your profile. For example – If you are a Retiree and receive income from house property only, it is very much essential to have your property covered with Home Insurance.
- Most of us spend more time to plan investments but very less time on insurance planning. Some people are even superstitious about taking any type of insurance. They consider it as bad omen (bad shagun). It is better to change that perception.
- If you have understood the importance of insurance especially about life and health insurance, request you to educate / convince people around you to take right insurance plan. It can be your friend, maid, car driver, relative…also educate them about how to claim when an unforeseen event happens.
- We are mortal. If death is certain, can insurance be optional? If life is unpredictable, insurance can’t be optional.
(Image courtesy of fantasista at FreeDigitalPhotos.net)