What do people fear most? It is an uncertainty of life, which makes people worry about their loved ones. So, there must be a solution to this problem, which will at least cover your loved ones financially in case of need or contingency! Yes, there is indeed a solution – insurance. Insurance will help cover the insured and/or the family of the insured. This article will help you understand a few important things like the importance of insurance, how to choose insurance and it will answer the most important thing – how much should be the coverage and why?
Types of insurance which deal with most important aspect of contingency management
- Life insurance: – Life insurance will cover the most uncertain thing in life which is – death. There are again many subtypes under life insurance. There is a term plan which will need the insured to pay a fixed sum for the predetermined time. There is also an endowment policy which will provide survival benefits along with death coverage.
- Health Insurance: – Health insurance provides coverage for the medical emergencies and hence second most important. Most of the employees have group health insurance but it needs to be analyzed and assessed whether your group insurance covers the potential liquidity needs and is optimum or not. If not, then it is time to raise your sum assured which will help you cover the unexpected medical emergencies. It is always suggested to have medical cover over and above the cover provided by the employer.
In this blog, we will focus on Life insurance only.
So let us see how to assess whether you have enough life coverage or not?
- Loan coverage: – Needless to say that we all have some kind of debt burden, be it in form of housing loan or be it in the form of car loan or any other type of debt. Make a list of all such loans and arrive at an approximate figure of total loan repayment. If your total sum assured takes care of this loan liability, you are safe, otherwise, it is time to raise your stake. This will help your family to pay off the debt in case of any unfortunate event.
- Routine expenditure: – This includes basic expenditure like power, rent, grocery expenses, etc. which can’t be avoided and must be incurred for survival. Add up all your sum assured and/or retirement income and factor with the expected inflation rate. If your sum assured could cover this inflated required sum then you don’t need to touch your insurance.
- Lifestyle expenditure: – These are the expenditure which is incurred to maintain a lifestyle. So, this will cover pretty much basic expenditure like vehicle maintenance, second home repairs, renovation expenditure etc. These are the ones which are hard to locate, but if considered at the earliest, even these expenditures are easy to cover.
- Savings to income ratio: – If you save almost around 35% or more of your income, then it is safe to say that you need not invest more in life insurance. For e.g. consider that you have been investing 30% of your income in mutual funds having an approximate rate of return of 10-12%. Also, that you have invested in term insurance which will cover your family in case of death of the insured. In such a case, you need not divert your further income towards the term insurance since your mutual fund investments will take care of it, So you should buy Insurance along with SIP for your betterment.
- Investment goals: – You may wish to marry off your children lavishly or you may be wanting to provide them with the best education. But all of it comes with a cost, and to provide for it your family will need strong financial support. You can easily achieve it by investing in the right kind of insurance. There are many insurance policies which are tailor-made for such events which help you cover these expenses even if you are not there with your loved ones.
Instances when you need to raise insurance coverage
- Getting married: – When you started earning, you may have thought only about yourself and your parents. But, when you get married, you need to think of your spouse also in terms of insurance coverage. You need to add your spouse to your nominee list too.
- Starting a family: – When you hold your new bundle of joy in your hands, the first thing that comes to your mind is about its safety and security. This is another major event when you need to restructure your insurance investment. When a child is born, you need to raise your sum assured to cover the additional expenditure.
- Additional income: – When you earn a promotion or income raise, it is time for you to consider a corresponding increase in sum assured. This will help your family to incur and adapt to the better lifestyle needs even when you are not around.
- Additional loan : – You may invest in a second home or a new car by resorting to loan for the same. But, while you take the loan, you need to think about repayment of the loan when you are not around. If not taken care of, generally this additional asset may be termed as a burden due to loan repayment by the nominee or heirs. To avoid this situation, you need to increase your sum assured to such an extent so that it will cover at least a major part of the loan repayment.
So these were some of the instances where you should be increasing your life insurance cover to keep you adequately insured at all times. You may download the Fintoo App to get a suitable insurance policy for yourself.
The modern times have seen a whole lot of progress in science and technology. There are newer and improved treatments for critical diseases which were not available earlier. As such, life expectancy has increased. However, one cannot ignore the rising incidence of diseases too.
Modern man is increasingly falling ill with major illnesses because of poor lifestyle. Heart-related ailments, cancer, organ transplants, etc. are victimizing more and more individuals. Against the cases of rising illness, medicine too has become expensive. A simple hospitalization drains you of thousands of rupees and sometimes even lakhs. Imagine if you contract a critical illness. Do you know the costs involved? It will definitely be in lakhs depending upon the disease.
Critical illnesses and their treatments damage your health and your savings. Having a critical illness plan, therefore, becomes necessary. These plans help provide the required funds for managing your critical illness.
You might be thinking that “I already have a health insurance policy, then do I still need a critical illness plan”. Well, it is important to know that your basic health insurance policy does not cover the critical illness. These are usually excluded from your mediclaim. So in case you are diagnosed with critical illness, your health insurance policy will not come to your rescue.
Do you know what such critical illness plans are and how they help?
What are Critical Illness Insurance plans?
Critical illness plans are health insurance plans which pay a lump sum benefit on diagnosis of a critical illness. The plan covers specified illness. When you are diagnosed with any of the covered illnesses, the chosen sum insured is paid immediately.
If you are wondering “Is COVID-19 covered under critical illness plans or not?” Let me clear that COVID-19 is not considered to be a critical illness as per insurance companies. Your normal health insurance covers the coronavirus treatment as per IRDA guidelines.
So what all diseases are covered under critical Illness plans? Let us have a look:-
- Heart Attack
- Multiple Sclerosis
- Major Organ Transplantation
- Kidney failure
These are some of the diseases covered under this plan. The number of diseases covered varies as per plans and insurers. It usually is in the range of 8 to 40. It is suggested that you check the list of critical illnesses covered before buying the plan.
Why do you need one?
As stated earlier, critical illness plans are helpful when you suffer from a critical illness. The reasons why a plan is advised are as follows –
1. It helps in supplementing your health insurance coverage
If you already have a health insurance plan you can avail the coverage for the treatment of your illness. But would the coverage be sufficient? Critical illnesses require extensive treatments and such treatments don’t come cheap. As a result, your health insurance coverage might fall short of meeting the expenses of the illness.
When you have a critical illness plan you get an additional payment on diagnosis of a major illness. This payment helps supplement your health insurance coverage. You can, thus, avail specialized treatments with the additional funds which you get.
2. The plan benefit can be put to any use
Yes, a critical illness insurance plan helps in supplementing your health coverage. But what if you have other expenses to take care of? Where would you get the required funds? From a critical illness plan for sure. The benefit of a critical illness plan is that you receive lump-sum benefit irrespective of expenses incurred. This compensation received can be used anyway. You can use it to avail specialized treatments, for paying off loans, meeting lifestyle expenses or on your recovery. There is no restriction on the fund’s usage. Isn’t it great?
3. You can save taxes too
If the above-mentioned benefits are not enough, you also get the tax advantage when you buy a critical illness plan. The premium which is paid for buying the plan is exempted from tax under Section 80D of the Income Tax Act. The limit is Rs.25,000 which increases to Rs.50,000 if you are a senior citizen.
Types of Critical illness plan
If you are to protect your pockets from the brunt of expenses incurred on critical illnesses, you better equip yourself with a critical illness plan. Even if you have health insurance, invest in a critical illness plan for better protection. You can buy the plan two ways –
- As a rider
- As a standalone plan
A rider is an additional coverage clause which can be added to a basic life or health insurance policy by paying an additional premium. Though riders are good, a standalone plan is better because of the scope of coverage available. Standalone critical illness plans provide better coverage than riders. They cover more illnesses and can be customized too.
So, include a critical illness plan in your portfolio. You would have to part with a couple of thousands in premiums but the benefits far outweigh the cost. In today’s age when diseases are rampant it is better to be financially prepared, isn’t it? You may download the fintoo App and buy a suitable critical illness plan.
INSURANCE! What comes to your mind when you think about insurance? Is it returns and investment? Well all these things are a part of the policy, but what is the actual meaning of ‘insurance’? Insurance covers ‘risk’. We can’t predict the future, so the possibility of an uncertainty happening with our life remains. Insurance was introduced to cover the risk of that uncertainty happening.
Having said the above, people buy insurance thinking it’s like an investment, which is not true. You can profit from an investment, which is not true in the case of Insurance. One cannot profit from insurance. This is the main reason why people end up with the wrong policies and then spread the word that insurance is a waste of money or the insurance agents are cheaters. It’s very important to understand the purpose of financial products before buying them. If you are not sure of the insurance policy, then it is advisable to seek an expert’s or a consultant’s advice.
Insurance, if taken for the right purpose, will suit your needs and work in your favor. For example, a person who wants to secure his family’s future, in case he’s not around tomorrow, the right choice would be a term plan as the situation is purely based on risk cover. Now, what if he doesn’t have much knowledge on the different policies and goes for a ULIP or an endowment, thinking of it as an investment avenue. Here is where people make mistakes. You always have to identify your needs first and then look at the features of the policy that will suit your needs.
Another reason why people buy wrong policies is because someone else has the same policy, maybe their friends, relatives, etc. Every person’s need is different. So obviously the insurance policy which someone else has, won’t be relevant to my needs. So it’s always best to find out your needs and then plan accordingly.
Let us see why do we need insurance:
1. Covers Risk:
Insurance means ‘risk cover’. As I mentioned earlier, we can’t really predict the future. The classic example is the current situation of COVID-19 pandemic which no one could have ever predicted. Of course you can’t put a price on the life lost, but you can put a price on the income that was coming in. The family may not get the whole income but, they can get part of it which can help the family get back on their feet.
2. Secure family’s future:
With the increase in prices and everything, people find it difficult to manage their current lifestyle, even though they are earning. What happens when the earning stops due to an uncertainty or in case of death of the earner?
Again, we can relate it to the current situation where people are facing pay cuts or job loss due to slow economic activity. This is a result of country wide lockdown owing to coronavirus. To avoid such a situation, where it can take a toll on the family financially, insurance is required.
If you have insurance, it brings peace to the other members of the family that they do not need to worry financially.
3. No compromise on future goals:
With insurance, one doesn’t have to compromise on their future goals. Everyone has goals that need to be achieved, it could be family goals, children’s future goals or even personal goals. So if a person has planned accordingly for funds to reach those goals and due to an uncertainty that resulted in death, now the family has no emergency funds.
Thus, they will now have to compromise on their existing savings, which were originally maintained for funding their goals. To avoid such hassles, insurance is required.
4. Child’s education:
Nowadays, even education prices are increasing rapidly. Everyone wants to do their higher education abroad. This puts a lot of pressure on the parents as they want to give their children the best. Education is something that cannot be compromised with. So there are many insurance policies that cater to this need. It secures the child’s education and future.
5. Financially Stable:
Having insurance also brings stability in the family. A person doesn’t have to worry about the finances. They can have peace of mind that they won’t have to arrange for funds to cater to their needs. There are policies that cater to the needs of the family immediately when the insured dies. As mentioned earlier, it all depends on the needs of the person.
6. Better to plan before hand:
Planning is something that everyone must do. It can be financial, investment, goal based, etc. Planning is mostly done to make sure that the goals of a person are achieved. Same way, Insurance planning is a must. You need to know how much money you need to replace in case you’re not around tomorrow. So that your family can live a better life.
7. Saves you the burden of worrying:
After the loss of a loved one, who is the only bread earner in the family, it is of course an emotional loss for the family, but there is also a financial loss. The family has to now worry about how they are going to manage the future expenses. So having insurance, reduces the financial burden of the family.
So these were the 7 reasons why you must have adequate insurance for yourself. It is further suggested that you make sure that along with you all the other earning members of your family are also adequately insured. You can download the Fintoo App to start the process of investing into an insurance policy suitable to your needs.
Coronavirus made us realise the importance of having adequate insurance to protect our family from any unforeseen incident. We all know that life insurance gives financial protection to your family when you are no longer there to care for them. There are different types of life insurance policies to cater to your different needs. One of them is Term Insurance.
Term Insurance is a policy which provides the policyholder with the death benefit. Usually, there is no maturity benefit in these policies and that is the beauty of it. As insurance companies do not promise a maturity benefit, these policies come at a very low premium and high sum assured. It provides an adequate protection to your family at minimum cost.
However, term life insurance can be a big aid in case of other problems too. This article will portray a number of problems which can be solved with term insurance. This is possible because insurers are offering additional benefits along with the term insurance.
Let us now see how a term insurance can be useful for you in 5 different ways.
Financial security during the times when you are unable to care for your loved ones
Have you ever imagined what will happen if you are no more to care for your loved ones? Standard term life insurance provides the death benefit, which means that the disbursement is made only in the event of death of the insured.
Your term insurance cover which offers the death benefit should at least be 10-12 times of your income. As everything is becoming expensive year on year, you should make sure your insurance cover is adequate.
Taking term insurance would ensure that your loved ones will not be affected by inflation impact. This way you would not only satisfy your family’s basic needs, but will also be consistent with their lifestyle needs.
Cover against disability or critical illness
Insurance industries have adapted themselves to the changing needs of the customers. Like I mentioned before, the basic term insurance only ensured payout in case of death of the insured.
But now many insurance companies have come up with various other types of term insurance with additional benefits. These additional benefits are called riders.
Certain term insurance policies provide cover against disability and critical illness, by paying an additional amount as premium for such additional benefit.
This option is cheaper as compared to the whole other insurance policy for the purpose of the critical illness or disability.
Also, term insurance for disability and critical illness comes much cheaper and is beneficial when you are diagnosed with a critical illness or meet with permanent disability.
Taking this rider of critical illness will be useful in the current phase of COVID-19 pandemic.
Term insurance with benefit of return of premiums
While most of the people still think of their term insurance as an insurance only where nothing is received on maturity, here is a fresh twist in the story.
The insurance companies have come up with a newer version which will pay the premiums back to the insured in case he survives the term of the insurance policy.
This has an added benefit to the death benefit existing in standard term insurance policy. This can be applied in retirement planning strategy as well. The amount received on maturity will be useful in incurring retirement expenses
Money back plans for liquidity
Money back plans are a combination of a term plan and endowment policy. It is the best instrument for tackling liquidity as well as insurance cover. This type of policy would benefit the insured in two ways.
First, if the insured passes away before the maturity of the term insurance, his family will get payout for the full sum assured even if the premiums were not paid for the whole term. This disbursement includes any accrued benefits or bonuses, if any.
Second, he is entitled to receive proportionate amounts at periodic intervals and will get the remaining corpus (with additional benefits) if he survives the tenure of the policy.
However, this type of plan is recommended only where you are unable to save money and are planning to reinvest the periodic payback amounts in attractive investments or to buy huge assets (which would otherwise cost you exorbitant interest on the loan).
Double benefit rider in case of accidental death
Some of the policies will have the benefit of opting for additional riders for accidental death. If the insured meets with the accident, then term insurance will generally pay double sum assured.
This type of policy is suited for those who work in hazardous environments or the risky work environment. This type of insurance cover is usually available on payment of slightly higher premium and it is not available as a separate policy type.
Term plans are not just an insurance cover, but they also act as an investment in some cases. When you opt for any other plan than standard term insurance plan (like TROP or money back plan), they pay you back the premium and in certain cases, the added benefits as well. This happens where the insured outlives the term of the insurance.
Retirement Planning can be done by various investments like mutual funds, NPS etc. Treat this term plan as a cushion in your corpus. You should not consider it as the only option for doing investments for retirement.
While planning for retirement, you can always look at term insurance plans as you will benefit from cheaper premiums (where the candidate enters at an early age) and provides cover for the maximum term.
In the case of survival benefits, you will get the rest of the corpus in addition to the regular payout during the term of the insurance.
An average investor may look at the insurance plan only as an insurance cover which will secure the family’s future in case of his death. However, look out for various other options available within insurance to effectively use the same for solving the biggest problems.
Download the Fintoo app to get started with investing in Insurance.
Financial experts say that – Disciplined equity investing can change your life in a disciplined way! This means that the one who masters in equity investing can have a sound and safe financial future. Isn’t that great? With strong wealth creation strategies and practices, one can create their own strong financial base that could further prove to be a strong financial support for the family.
If you are getting worried looking at the current market situation where the market fell by approx 30% initially majorly because of the Covid-19 pandemic, then please be informed that this is not something which has happened for the first time. Even in 2008, when the markets fell drastically, soon after it recovered in 12 months time giving double digit approx 75% return the next year. So no need to worry looking at the short term volatility. Wealth creation is a long term process.
Now let us see how we can invest in equity.
Depending on your savings you can choose your investment options. In this, there are two cases-
- If your income is regular, you can invest through SIP mode
- If there is no defined pattern of your income, you can save and invest lumpsum.
It is suggested that you invest through the asset allocation process by matching your personal goals, investment objectives, risk profile as well as time horizon.
You must be thinking which option is better for investing among the above available two options, right? You can clear your doubts and queries in the below segment –
In any of the approaches that you choose, the main point of consideration is to align your asset allocation to your personal circumstances and objectives.
The SIP mode can be preferred for a regular saving that would further help in building the discipline to investing. This provides the benefit of rupee cost averaging as well as compounding in the long term. The lumpsum investment must be in line with the asset allocation that is necessary to compute the investment objective, risk profile and even time management.
This was about general investment plans of how to plan your investments and which factors to keep in mind before investing. With these investments, we can have our own wealth creation that is obviously everyone’s dream. In spite of this being a wish of everyone, not all are able to successfully do it. Apart from following the strategies of investment gurus, there are some of the really helpful practical tips that can help you with better investments.
Before we dive into these practical tips, let’s be clear that there is no full-fledged working strategy of wealth creation in equity. You need to implement ideas, develop strategies for your finances that could help you a lot in future. So, let us now have a peek at the top 5 insiders rather say key ideas for having good wealth creation in equity:
The prerequisite- Set your financial goals:
This is the primary requirement for your wealth creation plan. Depending on undertaking the risk, you can set up your financial goals. You need to understand your needs and wants clearly and accordingly approach it. Your hard earned money needs to be properly invested and so you must decide how and till which period you need to invest. This is called goal based investing. It is important to have a goal in place before starting the investment to achieve it. This is necessary because the investment decision should be based on the nature of the goal and tenure of the goal.
The most important thing- Research:
Research is another prime factor to consider for your investments. Generally, people say that investment in equities is nothing less than gambling. There is a term called “tip” that decides about your investment in equities which is just a mouth of victory without any backing. With strong and thorough research, equity can be a more of a knowledge based wealth creating medium. As a result, it is advisable to invest your time too in learning the basics of equity investments. You can also get in touch with investment experts online platforms like Fintoo to guide on the same and help you with the investment process.
The must-have thing: Focused Portfolio:
After thorough research, you need to have your focused portfolio for carrying out investments. Focus on a few good names that can help you out with wealth creation rather than running behind 100 present in the market. Instead of managing big portfolios, focus on the small but good ones. Investing in few quality stocks or mutual funds can help you in managing your portfolio in simplest ways.
Consider investment period- Long Term:
If you are planning to invest in equity, it is advisable to invest for a longer time. The best thing you can do is buy the right funds/stock and hold them across the market cycle. The investments that you make in equities are not just about picking up quality stocks, but it’s also about how much patience you have to see your money grow. Keep in mind that – Big money is not in buying or selling, but instead it is in waiting patiently.
The last one- Reconstruction:
In the investment process, there are chances that your risk appetite may change or you may even come across any unwanted or unexpected circumstance while you are still investing. In such time, you need to effectively revise and reconstruct your portfolio. This is necessary in order to benefit you from the risk reward equation. Churning and updating your portfolio at regular intervals is not advisable as you may miss something big at some time. So, a better option is to reconstruct the portfolio according to the risk appetite only when it is needed.
Thus, these were some of the best tips that one should keep in their mind before making investments. Just be updated with the market trends, update your knowledge and keep a strong focus on your strategies that can help you with better investment plans and of course return on investments too.
For any further guidance and to initiate your investments, download Fintoo App and get started.
Have you got your health expenses covered? Or are you still confused whether to take a family floater or an individual health cover? Well, whether you fall sick often or not is not the point, health insurance plan is to cover the risk of your medical bills going over budget. Some people fall sick quite often in a year, whereas some fall sick maybe once or twice a year, there are some who also fall sick, every time the weather changes, this is normal.
But what happens, when there are viruses going around, like COVID-19?
Medical bills are bound to go over the top. This is something no one can predict, as it doesn’t happen often. So if you are still thinking that you do not need health insurance, then think again.
For a family, with a husband, wife and children, there are 2 options of health insurance. One is individual health insurance and the second family floater. Under individual health insurance, each member of the family gets a separate health insurance policy, whereas under family floater, there is one cover spread over all the family members.
For example, Mr. Jay, 33 years of age, his wife Mira 31 years and one son Vijay, 9 years. Jay is thinking of buying a family floater worth Rs 5 lakhs, so this 5 lakhs is for all the family members. This means that if the medical bills of all 3 of them come up to 6 lakhs in a year, they will be reimbursed only till 5 lakhs.
Now let’s take the same above example, but in this case, Jay wants to buy individual policies for his wife and child. So he takes a policy of Rs. 3 lakhs per person. This way if each of their medical bills come up to 2.5 lakhs, they will all be able to claim their amounts.
Must Read :- How Much Life Insurance Do You Really Need?
Now let us throw some light on lesser known facts:-
- In a family floater policy, when a child becomes an adult. They have to be moved out of the family floater cover. The maximum allowable age of a dependent child varies from 18 years to 25 years. It is different for different insurers. Beyond this specified age, they are treated as adults. They have the option to buy an individual cover without impacting the continuity benefits such as waiting periods. It will remain intact with the insured who is taking an individual plan.
- In individual cover, the entire sum insured is for an individual and it is not shared among all the family members like family floater cover. If we look at the amount of cover available here, the better option is individual health insurance policy. But all good things come with a price, here the price to pay is higher premium than a family floater.
- Family floater Cover works on the principle that it is very unlikely that all the family members get admitted to the hospital in the same year. Therefore, each member could utilise the maximum limit of cover.
- The premium of family floater plan is decided based on the age and health of the eldest member who carries the maximum risk. This could prove to be a disadvantage if the health of even one member is below average. It will have an impact on the premium.
So what should you do?
We would suggest that you go for a family floater health Insurance Plan if you have little kids, and no major disease or illness. Floater plans will offer you better cover at lower cost than multiple individual plans.
But in case your family has a history of chronic issues, floaters will be inadequate and therefore buying individual health cover will help in the long run.
If you have any further queries, you may download our fintoo App to discuss with our experts to guide the best insurance product for you and your family. Stay Healthy!