While risks are a part and parcel of one's life, most individuals live under
the false impression thinking 'It won't happen to me.' And hence do not take
adequate measures to prepare themselves against the uncertain future.
Know that simple planning can go a long way in protecting you and your
family from several hardships that life can spring up. Of course, the
emotional and mental trauma of an event can never be quantified or protected
but you can definitely protect yourself against the financial hardships that
usually accompany such situations.
1. Risk of ill-health
While advances in science and technology have been able to save lives from
innumerable diseases and thereby increase the average life expectancy,
change in lifestyle has resulted in several new medical problems coming up.
Cases of heart attack, diabetes among others has gone up considerably and so
have the expenses associated with them.
Therefore, a Mediclaim policy is a must for everyone. Know that even a minor
hospitalisation could be equivalent to three to five years of premia you
pay. Besides, there are group covers too wherein you can cover the entire
family under one policy.
Another associated risk is that of disability, either temporary or
permanent. This risk can be covered through an 'Accident Insurance policy'
which is quite cheap and won't hurt your finances much. Additionally you can
also avail of tax benefits for the premiums you pay.
2. Risk of untimely death
Terrorism, natural calamities, accidents and so on, resulting in the
untimely death of the breadwinners is a traumatic experience for the family
of the dependents.
You can secure your family by buying adequate life insurance. Two things are
important here -- how much insurance you buy and which policy?
As far as the type of policy goes, get a term cover only. This is the
cheapest life insurance cover available to cover pure risk. Don't look for
returns from your life insurance policy. Hence don't buy
investment-inefficient policies such as endowment, money back or ULIP (Unit
linked Insurance Policy).
As regards the amount of cover, just estimate how much amount you would have
earned till retirement and calculate the 'present value' of that amount.
This would be the approximate amount you need to insure for. (Don't worry --
calculation of present value is a very simple formula).
3. Risk of loss of income
Another common risk today is that of losing one's job and hence the
earnings. This, together, with the increase in life expectancy would mean
increase in the non-working years. Hence, financial security becomes
increasingly important.
There are no insurance policies against such a risk. You would need to build
your own protection plan that suits your circumstances through proper
financial planning by moving from 'saving' to 'prudent investing'.
Starting from emergency funds to short-term needs to long-term dreams, we
need to design our financial road map ourselves. Therefore, goal setting,
asset allocation, investment selection and investment monitoring become very
important. (Again don't worry -- the terms may sound big, but it is all very
simple planning).
4. Risk to physical assets
Fire, terrorism, theft, earthquakes among others expose your physical assets
to risk. Such risks can easily be protected today by way of 'Home Insurance
Policies'. However, take care to read the terms carefully, to see what is
insured and what is not.
5. Risks related to your home loan
In the last few years, we have seen an explosion in the number of people
buying homes, which are mostly financed by way of home loans. The amounts
run into several lakhs and the repayment term is around 15-20 years.
These huge amounts as well as the long repayment periods pose a risk. Should
anything go wrong and you are unable to repay your loan, you could risk
losing your house. To take care of such risks, you can opt for a suitable
'Home Loan Insurance' and protect yourself.
It is true that the above mentioned protection will involve some cost. But
then these costs would not add-up to more than what you annually spend on
weekend dinners/movies or your vacations. Moreover, they are essential given
the increased uncertainties
Life Insurance-Always take Term insurance & never take ENDOWMNENT bonus
policy and NEVER trust LIC agent.
>From Rediffmail.com
Manoj Raikar
Goanet supports BMX, the alumni network of Britto's, St Mary's and
Xavier's -- three prominent institutions in Mapusa, Goa. Events
scheduled from Dec 16 to 21, 2006
For more details visit http://www.bmxgoa.com
