Death and taxes are certain, so goes
the time-tested adage. While death is certain, no one welcomes it with open arms
and it is indeed sad, crushing and an devastating. And untimely death more so.
The distress it causes to loved ones, have to be experienced to understand the
pangs of agony and the throes of pain. It is inexorable, slow and long drawn. While
the emotional distress can be nerve wracking and enervating, a financial
distress (if it happens) would be devastating.
Now and then we do hear the shocking demise of someone very young. More often than not the sad part is, the dependents are left in the lurch when it comes to money especially women. Daily normal life becomes an ordeal. This root cause is the inadequate insurance amount. Invariably our relatives or friends would be insurance agents (no escaping) and with great persuasive powers would have sold us endowment policies (yes plural). Most of us do not think too much is about the insurance cover, whether it would be sufficient to meet future cost of living. Since endowment premiums are on the higher side, one tends to turn a Nelson’s eye in this regard. At best the cover would be 10 to 20 lacs since the premium is very high.
This section is mainly for males who
are in the 25-30 age bracket, employed, earning and spending with gay abandon (on
the lighter side). Financial literacy and especially insurance would the last
thing on their minds. If something happens to you what would your spouse do? Is
your savings sufficient to take care of basic needs of your spouse for decades?
Would the insurance amount be sufficient?
A small illustration – If current
needs are 30k per month, the corpus required in a safe instrument say a bank FD
@ 7% p.a. would be to the tune of 50 lacs. Its less than 6% today and the low
interest rate regime is likely to continue for quite some time as central
bankers have no other option.
Most of you would be surprised to hear that the biggest enemy of mankind in financial terms is inflation. With inflation of around 5% your monthly expenses of 30k would shoot up to 38k in 5 years, 48k in 10 years, 74k in 20 years and 91k in 25 years. I think the point is driven home. The size of the corpus is very important and mere savings / investing would not take you there in case anything untoward happens. The only way to mitigate this risk is insurance, term insurance to be precise.
A term insurance, for the uninitiated, is a plain vanilla insurance cover with no bells and whistles. In layman terms, it is like a 2-wheeler insurance, no returns whatsoever at maturity. This aspect puts off many of us from buying a term insurance and which the agents capitalize on. In fact, it would be easier to find the proverbial needle in the haystack than find one insurance agent selling you a term insurance. Looks like not getting any returns at maturity is very agonizing and distraught!! We blithely forget that we pay vehicle insurance premiums all the time, without any expectations of any returns.
A term plan for those in the 25-30
age bracket would cost you anywhere between 6-10k PER ANNUM and that is all you
need to secure your dependent’s future. The premium is pretty low when compared
to the kind of spending we do all throughout the year. Also with that small sum almost
all your insurance needs are taken care of, leaving you free to invest the
remainder of your savings in other asset classes to meet your financial goals.
A term insurance is the first financial task that MUST be undertaken to secure the family’s financial independence and peace of mind. This is the best gift your dependent wife can have, whatever the feedback you might hear. Do NOT procrastinate. Procrastination is the biggest enemy of mankind. All opportunities go past us, only because we have a great propensity to procrastinate and for some inexplicable reason have an insatiable to be delighted in engaging that favorite pastime.
Stg
