Insurance – Life

    Special points of interest:

    • Life Insurance is very vital for all individuals
    • Only people with dependents should have it
    • The best plans of insurance are term plans
    • We should be covered till we are actively engaged in our profession

    We like to live our lives without the fear of the most certain eventuality that we all face i.e. death. However that is the most certain aspect of our lives. Every person that is born has to eventually pass off to another realm. Though the event is certain to occur, the timing of the event is something that no one is aware of. So how do we ensure that in the unfortunate circumstance of an untimely eventuality we protect our family after we are no longer available to take care of them.

    The answer in one single sentence is LIFE INSURANCE. 

    The definition of insurance as googled is a thing providing protection against a possible eventuality.” So insurance is an income replacement and not an investment. 

    As soon as an individual starts earning, one of the first things that the person needs to do is to ensure that his/her life is covered. (The first precaution should always be the health of the individual, hence medical insurance takes precedence over life insurance). Life Insurance cover should be initiated the moment one person has dependents on his earnings. If the person is a unmarried and has dependent parents, the individual needs to get his life covered, else the day he gets married is a good time to cover his/her life.

    The next issue is what should be the amount of life cover that one needs. A way to look at this is: how much amount if I invest in a very simple savings instrument like bonds will be able to substitute my active income. For example, A person earns a salary of 7 lakhs per annum. And the current bond rate is 7%, than his sum assured will need to be 1 Cr. 7% of 1 Cr is 7 lakhs.

    Another aspect that needs to be dealt with is what kind of insurance policy should I be taking? The  easiest answer to the question is term insurance. It works like the car insurance, one never sees the money paid to the insurance company but, the survivor gets the benefit of the sum assured in the case of eventuality. Please do not mix insurance with Investments. Investments are required for building a corpus and ensuring a comfortable retired life, not insurance.

    The total time of insurance cover that will be required will be the working life of the individual. If a person will be working till the age of 60, the person needs a  cover till the age of 60, (just a reminder it is a replacement of the earning capacity).

    Please feel free to get in touch with us if you need any further clarifications or need any assistance in your matters related to money aspects.

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