Well most of us have insurance, but have we ever thought of how much insurance a particular person need?
There is a scientific approach called Human life Value done by financial planners to calculate quantum of insurance cover needed by a particular person.
Though in this article I am giving a brief of that, however we must have insurance equivalent to at least 8 to 10 years of your annual Income for e.g Mr. Karan 30 year old having an annual salary of 10 lakhs needs to have an insurance of 1 crore.
But that is not the whole story if you have liabilities like home loan, car loan or any other liability, that must be included in your insurance cover because on the event of your demise your family will face lot of trouble while meeting these big budget liabilities, in addition to this you can also add cost of education of your child, his/her marriage and expenses as to fully secure your family.
Well you may be covered from your employer but that may be partial coverage so you need to buy an additional amount of insurance cover.
“In the above example a cover of Rs 1 crore to a 30 year old person will cost between Rs. 8k to 10k only and that comes to Rs 700 to 800 on monthly basis much below than dining out with family and that’s the greatest gift you can give to your family.
Well term insurance is widely accepted all over the world but has not gained too much importance in India only because people can’t deal with the statement that they will die some day or the other, and term insurance only pays on death that is true, but the thing is if you live, then you can take care of your family, but if you die, term insurance is there to rescue your family for all financial needs.
But what most people do, they stuck with traditional endowment plan which merely generates 4% to 6% returns and won’t provide proper coverage.
“Life is full of risks but if you know how to manage risk then you can live in harmony”
This blog is written by students of Post Graduate Diploma in Financial Planning (PGDFP), International College of Financial Planning (ICFP), they are Parveen Tiwari, Shalini Tyagi and Pankaj Kumar.
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