Skip to main content

Life and Health Insurance – The Right Way to Look At

Firstly, an insurance (any kind of insurance) is always your B-Plan (Back-up Plan). There is a room for B-Plan only when you have A-Plan (Actual / Primary Plan). B-Plan is for use when A-Plan for some reason doesn’t work or fails. So, obviously there can’t be B-Plan if there is no A-Plan in first place or if the A-Plan is successfully executed.

Let me elaborate to tell what I mean.

You have so many financial goals and responsibilities towards your family – Funding your Children’s  education & career, Getting your daughter married, Owning a house for your family, Ensuring post retirement income for spouse (& yourself) etc. The A-Plan to achieve these goals is work, earn and save & invest.  So, if you work for several long years or till your retirement, you are going to work / execute A-Plan. But, what if fate doesn’t allow that and some accident hits to leave you dead or disabled? Your future income will no more be available to the family. Then what about those goals? That’s where B-plan (Life Insurance and / or Personal Accident Insurance) kicks in ensures that the goals are still achieved.

Once you have worked enough number of years and achieved all your financial goals, your A-Plan is successfully executed. There will be very little or no adverse financial consequences, in case of your death / disability at that point of time. So, B-Plan (Life and Accident Insurance) is redundant or not required.

Similarly, One of your financial goals should be creation / accumulation Long Term Emergency Fund for your old age health care expenses. You need to have this goal very early / from the beginning of your working career. So, by the time you will be able to create a sizable fund exclusively earmarked for your & spouse’s old age health care. Your A-Plan is to build this corpus over a period of time (say in 10 years) or by the time you turn 50 years old (age since when Health Insurance premium rates start increasing sharply). While you are on the course of saving and investing for this goal, what if a critical illness hits you? Or you are required to get hospitalized for some accident / prolonged sickness? You will be ill prepared to pay for such huge expenses; it will turn all your plans upside down. So, in such case B-Plan is having health insurance and critical illness insurance.

Once you have achieved your goal of creating Long Term Emergency Fund through A-plan (Saving & Investing), B-Plan (Health & Critical Illness Insurance) is not required or you may switch to a cheap super top-up /deductible policy (a kind of economic health insurance which pay only if the hospital expenses are beyond a pre-determined (deductible) limit.


Popular posts from this blog

There are two types of self-serving Insurance intermediaries – Online Portals and Insurance “Salesmen”. Each of these are broadly of two types again. Two types of Online Portals are – Aggregators, earning referral fees and Brokers earning commissions. Online portals are too focused on conversions and quick sales than understanding the customer needs, educating the customer etc.; well online portals are not built for that kind of high-touch & personalized engagements. Then, two types of Salesmen are – Sales Staff of Banks or Sales Executives, earning incentives, lured by pay hikes/promotions and Individual Insurance agents earning commissions, lured by foreign trips etc. These salesmen too are too focused on achieving their personal sales numbers than what is best for the customers. A disclaimer to clear any smallest doubt – No, I don’t mean all of them are same; not all are bad. Then there are media houses, bloggers, vloggers, influencers earning th r ough ads or/and referral f

Side-effects of Bull Markets (esp. baseless ones) on Investor Behaviour

Sometimes, few (very few) clients ask me why I don't give them transaction access to their investments with me. They feel, it's their investment (money) and they have birthright to have transaction access to their investments. They feel, like their bank gives them internet & mobile banking, debit card, cheque etc and enables them to freely operate their account as they wish, I should also give full transaction access to their invesments. Few (very few) other clients feel, I should "co-create" their investment portfolio taking into account their understanding & assessment of geo politics & its impact on economy & market, their views on the 'trends' in the market, their view on how the pandemic is going to play out and impacts the economy & different sectors and so on. They feel this 'obviously' because of their vast experience of 2+ years in stock market, they have made great returns and found a knack of investing in the market. F

Write Your Will, Right NOW!

Most people think one should write a will (do estate planning) when they are old. Almost everyone thinks they should write a will when they are rich or have lot of assets. "The best time to write a will is just a day or a moment before one dies! But we don't know when we die. We may die anytime. So we should write the will right now!!" I read or heard the above, the first time, few years ago. I felt it is so simple and strong statement. I started my work on my will right from that moment. It took sometime to understand finer details and way to do it and more than anything else overcome the myths I had (like anyone else) about will writing. Covid-19 is reminding us the above quote in a harsh way. Lakhs of people getting infected, Tens of thousands scrambling for life and thousands of people succumbing every day - with no discrimination of age, gender, net worth etc. We all have lost some or the other in our circles (family members, relatives, friends and/or colleagues). I