In our day to day lives, we often tend to underestimate the importance of Insurance Planning which in turn may lead towards a major financial instability within our family due to an occurrence of uncertain & unexpected events. Thereby, early Insurance Planning in a systematic manner is crucial to avoid distressed liquidation of assets. We strongly recommend life insurance, critical illness policies, term insurance and various other health related saving plans.
Various insurance policies include a surrender value provision that entitles individuals to redeem a policy’s benefits early. As a result, various individuals tend to consider insurance policies as investment alternatives. We advise our clients and recommend suitable policies after a detailed analysis of their requirements, financial ability, and various other criteria. We strongly recommend Insurance policies to be considered as long-term Risk Mitigation products rather than Investment alternatives.
In many ways the principles are the same and you need to approach Insurance Planning with the same rigour with which we look at our investments. As we progress in life and our careers, our needs and expenditure increase, especially around specific milestones like children’s education, among others. We will also need to provide for ill-health or any medical exigencies in the immediate family. One major learning from the pandemic has been to provide for scenarios related to job loss or even a reduction in income due to the slow-down in the business environment and any government regulations that might be put in place to help mitigate the same.
Therefore, it is important to look at a bouquet of products that can help us manage any exigency without requiring us to curb our lifestyle or be unable to meet any important milestones for the family. We need to look at products that supplement at times of job or income loss at the base level and add on health insurance and critical care plans as necessary layers. It is important to look at the fine print and see if the premium can be increased or decreased with changing requirements, as the case may be. Ideally, we should increase the premium as and when we see an increase in our income so that we are preparing to maintain our standard of living.
The first step towards an efficient Insurance Planning approach is to determine an individual’s income, financial, and educational needs. Such forecasts may be determined through the process of an in-depth analysis. The amount of regular income that would be required by an individual’s family post an event of death of the individual can be determined through a forecast of future expenditure. Furthermore, a liability such as debt that is not forgiven at death and is in turn passed onto the remaining members of the family may be considered to avoid an unwanted capital burden. Also, expected child education costs are usually considered.
It is after considering the necessary present and future outflows that we can arrive at the insurance policy coverage limit as a base. We will then add-on effective health insurance plans for all family members based on their age and the family history, with specific add-on policies for critical care taken to augment the overall protection against the potential downside.