How to conduct an objective audit of your Insurance needs and policies?

Nutan Gupta

04 Oct 2016

Buying a life insurance policy is one of the most important financial decisions that a person makes. More importantly, this decision has a long term impact and hence, needs to be reviewed regularly. So even if you have purchased a policy years ago, it makes sense to conduct a regular audit of your insurance needs.

By definition, a life insurance policy should provide a cover that is big enough to take care of day-to-day expenses of the family and also of the long term financial goals like child’s education, their marriage etc. Since over the course of life, one’s financial goals are achieved or change, a re-look at the existing insurance policies and whether they are adequate enough or not, goes a long way in giving peace of mind to the policy holder.

One very important thing to note here is that the policyholder should be very clear about his short-term and long-term needs, separately. Since both needs are addressed by different financial products, the insurance policy to cover both types of goals should also be different and in line with the time horizons.

When people buy their first insurance policy, most of the times they don’t read the fine print and end up overlooking the option of adding riders. Riders are used to provide added benefits that help in customizing insurance as per an individual’s needs. Riders like critical illness cover, accident and disability coverage etc are some of the more useful ones.

Many people purchase insurance to save tax. Though it is a wrong approach, it nevertheless helps a person save some taxes. The policy holder can claim deductions on the premium paid for life insurance. But with time, one’s insurance requirements might change. So if the policy that was purchased solely for the purpose of tax-saving is found to be unsuitable, it’s best to surrender it (or make it paid up) and go for the right policy as per actual needs.

If a policyholder keeps these important points in mind, it will help him/her in getting the maximum benefit from the policies.

Similar articles

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

Load More
mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


Banner

How to conduct an objective audit of your Insurance needs and policies?

Nutan Gupta

04 Oct 2016

Buying a life insurance policy is one of the most important financial decisions that a person makes. More importantly, this decision has a long term impact and hence, needs to be reviewed regularly. So even if you have purchased a policy years ago, it makes sense to conduct a regular audit of your insurance needs.

By definition, a life insurance policy should provide a cover that is big enough to take care of day-to-day expenses of the family and also of the long term financial goals like child’s education, their marriage etc. Since over the course of life, one’s financial goals are achieved or change, a re-look at the existing insurance policies and whether they are adequate enough or not, goes a long way in giving peace of mind to the policy holder.

One very important thing to note here is that the policyholder should be very clear about his short-term and long-term needs, separately. Since both needs are addressed by different financial products, the insurance policy to cover both types of goals should also be different and in line with the time horizons.

When people buy their first insurance policy, most of the times they don’t read the fine print and end up overlooking the option of adding riders. Riders are used to provide added benefits that help in customizing insurance as per an individual’s needs. Riders like critical illness cover, accident and disability coverage etc are some of the more useful ones.

Many people purchase insurance to save tax. Though it is a wrong approach, it nevertheless helps a person save some taxes. The policy holder can claim deductions on the premium paid for life insurance. But with time, one’s insurance requirements might change. So if the policy that was purchased solely for the purpose of tax-saving is found to be unsuitable, it’s best to surrender it (or make it paid up) and go for the right policy as per actual needs.

If a policyholder keeps these important points in mind, it will help him/her in getting the maximum benefit from the policies.