• Life Insurance
  • Many of us consider insurance just another investment for tax saving. Our day-to-day life is full of unpredictable risks for example loss of life, loss of income, critical illness, disability etc. Insurance planning means figuring out adequate cover against "insurable risks" and getting the maximum out of the premium you pay. Tax exemption is just another aspect of it.
    Having the right insurance cover gives you peace of mind as it provides financial support in case of contingencies.
     
    Insurance is for the earning member of the family
    Life insurance is a replacement for your income. When your income ceases or falls insufficient either due to death, illness, retirement or a major goal such as children's education or marriage, insurance fills in the gap. On your death, the money received from term insurance policies will provide a corpus with which the family can pay off debts, convert dreams to reality and still lead a comfortable life. You must have seen cases of non-working mothers or non-earning family members getting insured. It goes against the fundamental principle of insurance.
    Therefore it's important that the breadwinner covers the risks to his life and income, so that his family's quality of life is not compromised after he is gone.
     
    Your life insurance needs
    Calculating life insurance needs is not a simple exercise but you must evaluate your current and required cover  and take corrective action. Remember that each of us has our own lifestyle, goals, aspirations and dependents which may be completely different from the life situation for your friend or colleague. So what works for someone else may not work for you.
     
    There are essentially three ways to calculate your insurance needs
    a) Expense protection
    Calculates the corpus required to take care of the family's future expenses and goals. Inflation diminishes the value of money and hence expenses need to be adjusted to inflation for calculation of protection required.  

    b) Human life value
    It is the economic value of an individual; the present value of all his or her future income. Setting aside the part of income one spends on oneself, the protection required through human life value calculates today's value of one's income for the years till his or her retirement.

    c) Needs analysis
    In this method you calculate your needs by considering each of your dependents and what financial milestones you want to achieve for them. The needs may range from child education, marriage to repayment of loans. Next you assess your current assets and investments and shortfall due to loss of life. This gap in income can be filled up by insurance.
     
    For what term do you need this cover?
    Ideally, insurance must be taken to cover the working period in one's life. You take insurance to protect your dependents from the loss of your income; using the same logic, you take insurance for the time that the dependents are being supported by your income. Hence, it is advisable to take insurance till one's retirement. However, when insurance is taken for protecting and saving towards specific goals, then the tenure of the plan should match the years left for meeting the goal.
     
    What type of products suit you?
    Choosing a product will depend on the specific need and the life stage one is in. What is the final product you will choose? When there are multiple choices that match the need, it is the affordability that makes the final choice. Most importantly, individuals must be aware of the purpose of the insurance they are buying. They must know that life insurance products for investment and savings are structured for the long term and meant for someone who is earning and whose earnings are supporting his/her dependant(s).
     
    Please contact us for more details. We will be happy to help you.