Feeling safe and secure

Have you ever seen how a child laugh and enjoy when the father plays with the kid throwing it up in the air and catching it? Why the child is not fearing the fall? It’s the faith on the protection of the parent.

We adults too, overcome many of our fears such as social, academic, physical, family and financial fears with the help of tools such as buzzer alarm, health check-ups, prayers, Insurance etc to overcome the sense of insecurities.

The alarm clock helping us in having sound sleep, biker feel safe with helmet, motorist can speed up with faith in the brakes.  Insurances overcome fear of future of self and family in case of illness and unforeseen events.

These tools help in shifting the focus from fear to our activities. This shift helps in channelising our reserves of mental energy towards productive work which may otherwise be blocked by sense of worries and fears. The more we become free from worries of future and feel safe and secure, more we can focus on our present life.

Buying life insurance is one of the tools to overcome future worries and feeling safe and secure, but believe it or not, only 10 per cent of Indians are insured. Even though there is increase in educational literacy rate there is lack of financial literacy, due to which large number of populations remain uninsured or under-insured.    Lots of people die a prematurely every year from illness or accident and, if they happen to be the sole breadwinner in the family and it could have devastating consequences for their loved ones -their ability to pay household expenses, debts and maintain their standard of living.

The least we can do, therefore, is to secure our family’s financial future by buying a life insurance policy. Besides, do not overlook benefits of a life insurance during your lifetime, especially if you are young. Following are the compelling reasons for buying a life insurance policy.

1. LOOKING AFTER YOUR LOVED ONES EVEN AFTER YOU’RE GONE: This is the most important aspect of life insurance that one needs to factor in. Our family is dependent on us even after we’re gone and we certainly don’t want to let them down. Whether it’s for replacing lost income, paying for our child’s education or making sure our spouse gets the much-needed financial security, life insurance could save the day for our surviving dependents.

2. DEALING WITH DEBT: We don’t want our family to deal with financial liabilities during a crisis. Any outstanding debt/loans, will be taken care of if we happen to buy the right life insurance policy.

3. BUYING INSURANCE IS CHEAPER WHEN WE’RE YOUNGER: Not every millennial needs a life insurance policy. If you’re living off your parents’ money, insurance shouldn’t be a priority.

However, if we do have dependants or you have co-signed a loan with our parents (or any other member of your family or friend), whether it be a student loan or a home loan, we need to start considering buying a life insurance policy. Besides, coverage costs are much lower when we’re young. Insurance agents may try to sell you a policy that we might not need.

Therefore, do your due diligence or approach a right financial advisor to determine how much insurance you need considering the other assets you may own. Even if you’re single, there may be other dependents and you need to ensure they’re taken care of.

A term insurance provides protection for a specified period of time (10, 20 or 30 years) and pays out the benefits only if the insured die during the term. The policy will expire and coverage will end if insured outlive the policy. An investment-cum-protection plan on the other hand offers us a lump sum amount on the completion of the term of the policy. These plans also offer us protection but the insurance cover is usually low as offered with term plans.

4. TAX-SAVING PURPOSES: We could save taxes with insurance policies. The premium we pay on an insurance policy is eligible for a maximum tax benefit of Rs 1.5 lakh subject to conditions under Section 80C, and for tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.

5. WE MAY NOT BE QUALIFIED FOR IT LATER: Life insurance policies run on uncertainties. We may be healthy now and paying a premium for life insurance may seem to be an added financial burden, but if we suddenly fall ill with some specified diseases, we may not be allowed to buy a life insurance policy. Therefore, it is imperative to buy one early on in our life because it remains in force even if our health deteriorates later on. Insurance companies allow us to attach certain riders or benefits to your existing or new policy.

These riders enhance the quality of your insurance. The accelerated death benefit rider, for instance, allows the policy owner to avail all or a part of the policy’s death benefit if he or she has less time to live due to a critical illness, or wants to use the money for medical treatment or related expenses.

6. PEACE OF MIND: Death is unavoidable. In the face of tragedy, the least we can do for your family is to secure their financial future. Even if it is a small policy, you know that you’ve done all you can to help them tide over difficult times. We can have peace of mind with the feeling of safety and security.

How to choose best suited plan?

 First, determine the amount of cover needed.  The insurance cover we need as per financial thumb rule is 15-20 times your annual income, for those under 40 years of age and for those who are above 40 years of age, 10 times your annual income is the required cover. The rule may be tweaked taking into account other factors like our outstanding liabilities, number of dependents, future goals and desired lifestyle.

Second, choose the insurance company with good claim settlement record.

Third, choosing the right tenure.  Companies offer long term insurance cover till the age of 100 year.  However, it is recommended to take cover till the age of 60-70 since most of the liabilities are cleared till that time.

Take right financial decisions.

For further information please feel free to contact.

Kishore Hegde

CFA (ICFAI)

9930901086

moneyacts@outlook.com

Be wise, money-wise.

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