Although most of us understand the importance of insurance, many still choose to ignore the same. The belief that it will not happen to me is a big fallacy given the uncertain times we live in and the responsibilities we face.
In Cricket parlance, a helmet is worn before the player steps on to the pitch. Thus insurance is the step towards any financial planning. The following thumb rules of insurance will help you understand the adequacy of the insurance.
Ø Contingency Fund
6 months of your monthly household expenses should be reserved in Liquid Funds / short-term FD etc for any emergency need. Although this corpus you have to be created from your own savings via lumpsum / SIP and it is your own made insurance protection against any unforeseen events like an accident, job loss, illness, etc.
Ø Health Cover
1x of your annual income as the sum assured under mediclaim policy. One should understand that personal health policy is a must. Do not exclusively dependent on the employer group insurance policy, as after retirement it would be very tough & costly to get medical coverage, or in case you change the job, you will lose existing medical benefits.
Ø Life Cover
15x of your annual income as the sum assured under the life insurance policy (LIP) to financially secure the future of your dependents in case of any casualty happens with you.
Ø Income Protection
5x of your annual income as the sum assured under critical illness policy (CI) to protect your monthly cash flow in case of the detection of critical illness.
Ø Personal Accidental
5x of your annual income as the sum assured under a personal accidental (PA) policy. The complete protection against death along with disability either temporary or permanent in nature.
Conclusion:
· Above 5 insurance plans provide the Sampoorn Suraksha
· Rules of thumb may not applicable in certain unique circumstances and should be used as a guide or reference, and not a definitive principle in all circumstances.
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