Are you adequately insured

 

The basic concept of Risk Management is built on the following principle :

• Whether you can avoid the risk - possible through various risk management practices
• Whether you can ignore the risk - applicable in case of articles or goods whose value is nominal
• Whether you can retain the risk  - where the amount at risk is within your limits
• Whether you have to transfer the risk - where the risk is high and is beyond your limits

The principle of risk management, which is applicable to industries and firms, is equally applicable to individuals and families. If individuals ignore this aspect, entire family has to bear the burden of such indecisiveness. We come across many such cases in our day-to-day lives, wherein an individual with a liability of Fifty lakh Rupees, will be insured for a meagre sum of 5 or 10 lakhs, just because of his casual approach. The family members will have to bear the burden of such decisions and will have to forego either properties or will have to clear the debts by themselves.

The ideal Sum Insured would be :  Future income  +  Present liabilities.

This is for basic cover, without taking average annual inflation of 5 to 6%, into consideration. For example, an individual with the age of 35 years and with an annual income of Rs.5 lakhs, has to take an insurance cover for Rs.1.25 Crores(5 lakhs X 25 yrs). With  the rising incomes, this may go even up to 2 to 3 crores. Since the premium for an Endowment policy from any company will be very high for this Sum Assured, it is always advisable to buy a Term Policy at a nominal cost for either 1.5 or 2.0 crores, and secure ones family financially.

Once the family is secured financially from any uncertainties, the focus will shift to building a corpus for certain events in life like building a house or buying a flat, creating provisions for children's education, their marriages and finally for annuity or pension. Any miscalculation or adventurism will have devastating effects on middle class families and as such is not advised.

Please take the help of a professionally qualified Certified Financial Planner or an Insurance Adviser and protect your families responsibly.