Insure Your Family, Ensure Your Peace
I am 35, with 2 children (4 years and 2 years) and a monthly expense of Rs 60,000. I am currently investing Rs 4,000 for life insurance, Rs 2,000 for a term plan, Rs 5,000 in LIC for education (Rs 24 lakh at maturity), and another Rs 5,000 in Axis Blue Chip (expecting Rs 60 lakh). I believe the above investments are not sufficient for future planning. Can you advise me on my investment strategy?
It is good to know that you are aware of goal planning, insurance, and investment. The above information is not clear and sufficient to advise you on the investment strategy.
1. Rs 4,000 per month for life insurance is equal to an endowment or money back plan (term and sum assured are not mentioned here.) Your coverage amount could be Rs 6 lakh to Rs 8 lakh
2. For Rs 2,000 per month on term plan coverage (term and sum assured is not mentioned here), we assume coverage of Rs 1 crore
3. For Rs 5,000 per month on LIC (endowment/money back) maturity Rs 24 lakh, plan details not mentioned
The first thing that needs to be considered in financial planning is risk management. Do you have a sufficient amount of health insurance? As per your monthly expenses, your human life value would be Rs 1.2 crore + (all your responsibility). There is a gap in your insurance requirement. Your children’s education requirement will be after 14 and 16 years respectively.
Any endowment plan will give a return of around 6.5 per cent to 7 per cent maximum and in a mutual fund, you can consider a return of around 12 to 15 per cent over a long term that is more than 10 years. You also need to consider inflation of 7 to 8 per cent for calculating your goal amount. Assuming the same expenses, the age for retirement, and 8 per cent average inflation, you will require a monthly expense of Rs 4.10 lakh from the first month of your retirement. Therefore, you will require a corpus of a minimum of Rs 10 to Rs 12 crore. To have more clarity and the right solution consult a Certified Financial Planner to help you plan and implement future goals.
Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM
Mitul Singh, Delhi
Health insurance premiums have risen over recent months, a trend that has stretched budgets in middle-class households. This has added to the crisis created by an increase in all sorts of user charges, whether levied by banks or whether imposed by utility companies. What is your advice for an individual who wants to switch insurers and opt for low-cost policies?
All the health insurance companies have raised the premium of their insurance plan based on the current situation and higher claims.
1. You need to check and compare your policy with the plan you are planning to shift into. Check if the lower premium plans have any caps on room rent, other charges, and compare its coverage to the existing one. You can download policy wordings from the respective website of the company from which you are planning to buy.
2. If your existing plan is out of a specific or pre-existing waiting period, which means you have paid for at least 3 to 5 years in the existing plan so that it is out of the specific waiting period mentioned in the policy. Check with the new company if any waiting period will be applicable or not.
3. If you have had claims in past years then they may not consider your policy for portability.
Also, you must have every years’ policy documents as evidence.
4. It depends on the company’s discretion.
Health insurance is most important for our financial health as unforeseen circumstances can take away peace of mind if the health insurance or life insurance is not sufficient, and your savings and investment may get haywire. A small hole in a ship can sink the whole ship. After checking all these points, if satisfied you can try porting your policy 45 days before but not before 60 days to another company that satisfies your criteria.
Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM