Prepare for the Unexpected: Why Planning Ahead with Insurance Matters
This picture was taken by Manoj, who works as a car cleaner in my society. He usually parks his Scooty near the society gate, next to the road-facing wall. A few days ago, during a storm, strong wind gusts broke an aging tree near the wall, causing a large branch to crash down on his parked Scooty. Just a quick glance at the picture will tell you how incredibly fortunate he was.
Now, you have a choice: leave your life and property to luck, or plan ahead to handle such situations. My suggestion would be to plan ahead because it prepares you regardless of your luck on any given day. And remember, it’s not just about you; it’s also about your family members.
Invest in Health Insurance
Begin by obtaining a good health insurance plan. Most people only think about medical policies when faced with a hospital bill. With hospital costs rising, comparable to those of 5-star hotels, having medical coverage is essential even if you already have coverage from your employer. Choose a policy that covers hospital bills and reimburses expenses incurred before and after hospitalization. Families should opt for floater plans with adequate coverage, as these cover the entire family as a single unit. If you already have a good existing plan but need additional coverage, consider super top-up plans. These cover hospitalization costs only after reaching a threshold limit, which can be covered by your basic policy.
Have Adequate Life Cover
Next, get life insurance that provides adequate coverage. If your answer is yes to any of the following questions, you should have life insurance:
Are you married?
Do you have children?
Do you have parents with a meagre pension?
In essence, if there are people financially dependent on you, it is crucial to have sufficient life cover.
Now, let’s discuss what I mean by “adequate” coverage. One method is to purchase coverage equivalent to 10 times your annual income. However, a more precise approach is to consider the financial needs of your family if you were to pass away suddenly. Calculate the total amount required by considering:
Outstanding Debts: Include any home loans, personal loans, car loans, or credit card debts that would need to be settled upon your death.
Education Expenses: Estimate the future costs of education for your children, including school fees, college tuition, and other educational expenses until they become financially independent.
Living Expenses: Calculate the ongoing living expenses of your dependents, such as groceries, utilities, insurance premiums, transportation costs, and other everyday expenditures.
Additionally, account for inflation and the increasing cost of living when projecting future financial requirements for your family. Subtract any existing savings, investments, and assets that could be used to cover some of these expenses from the total amount needed for insurance coverage.
For your insurance needs, purchasing a term plan is the most efficient method. Calculating these exact figures can be daunting, so consider adding a buffer of 10-20% for greater certainty. Feel free to reach out to me for assistance, and I can provide you with more structured guidance.
Join Our Mailing List
Once Weekly Webinar
Free Webinar Once Per Week
Our free webinar runs once per week and is available to anybody who wants to know more about getting started on the road to financial freedom.