Financial Protection
// Financial Protection
Life Insurance
You can measure a value of an asset by its purchase value or by its market value. But a Human life value is calculated majorly based on his active income. If a bread winner in a family passes away in an accident or due to an illness, the financial loss is measured by how much he was earning. So a simple strategy is, let take a person earns 10 Lakhs a year. If that income has to be replaced yearly from a fixed deposit with 7% interest, he should have a deposit of 1.43 Crs. That is his human life value. This is a basic version.
Apart from that, outstanding loans and Incremental income growth has to be taken into consideration in order to achieve the planned financial goals.
Life insurance is an important tool to protect our ACTIVE income. If earning member in a family passes away.
There are two kinds of losses.
1. Emotional loss
2. Financial loss
Emotional loss can't be replaced. But financial loss can be replaced by proper insurance cover.
Health Insurance
Health insurance is an important factor of wealth protection. Most of the investors think,’I’m healthy. Why should I take a policy now’. But the point is, unexpected medical cost will eat your savings and investments which will be a hurdle in achieving your financial goals.
Under current scenario, we should have a health insurance cover of at least 5 to 10 Lakhs. In most of the policies under 5Lakhs, there are sublimits for every expenses. Next if you feel your health cover is less, go for TOPUP policies which comes up with a low premium.
Even if you have company group insurance, it's ideal to have a separate policy. There may be times you might quit a company or you start up your own business. During those times a new policy at that time will have multiple limitations.
