Step 4: Secure Your Life and ₹10 Crore

Once upon a time, three little pigs set out to build their homes. The first pig, eager for leisure, quickly built a house of straw. The second, slightly more cautious, used sticks. But the third pig, thinking ahead, took his time and built a sturdy house of bricks. Then came the big bad wolf, huffing and puffing. The straw house? Gone in seconds. The stick house? Flattened just as fast. But the brick house? It stood tall, protecting the pigs from harm.

Life rarely unfolds in a straight line—it’s more like a river, full of twists, turns, and unexpected rapids. To navigate these uncertainties on your journey to a ₹10 crore corpus, you need a safety raft. This is where the three pillars of financial security—Emergency Fund, Life Insurance, and Health Insurance—come into play.

An emergency fund is your financial safety net, designed to cover unexpected expenses such as medical emergencies, job loss, or urgent repairs. It ensures that life’s surprises don’t derail your ₹10 crore journey.

How Much Should Your Emergency Fund Be?

The general rule of thumb is to save 3-6 months’ worth of living expenses. However, this depends on your personal situation:

• If you’re a single-income household: Aim for at least 6 months of expenses.
• If you have dual incomes: 3 months may suffice, though more is always safer.
• For business owners or freelancers: Consider building a fund for 12 months’ expenses, as your income may fluctuate.

How to Build It

• Start by automating a fixed amount from your income every month into a liquid fund or a high-interest savings account.
• Avoid using this fund for anything other than genuine emergencies.
• Replenish the fund immediately after use.

Life insurance ensures that your family’s financial needs are met even in your absence. It also protects the ₹10 crore goal, ensuring your family can still achieve it if something unforeseen happens to you.

How Much Life Insurance Do You Need?

There are two primary ways to calculate your life insurance requirement:

1. Thumb Rule:
   Buy a cover that is 10 times your annual income.
   • Example: If you earn ₹12 lakh per year, aim for a cover of ₹1.2 crore.
2. Human Life Value (HLV) Method:
   This method takes into account your current income, expenses, liabilities, and future financial needs.
   • Step 1: Estimate your family’s financial needs (education, wedding, household expenses, etc.).
   • Step 2: Subtract your existing investments and assets.
   • Step 3: The difference is your HLV or required life insurance cover.

What Type of Insurance to Buy?

• Opt for term insurance, as it provides maximum coverage at minimal cost.
• Avoid mixing insurance with investment—stay focused on pure risk coverage.

Consider a 35-year-old sole breadwinner earning ₹10 lakh annually. After accounting for personal expenses and taxes of ₹2.5 lakh, the family relies on ₹7.5 lakh every year. But what happens if he’s no longer around?

The table on the right calculates year-by-year expenses for the next 25 years, factoring in 6% inflation. It also shows how much his family would need today to sustain these future expenses. The result? A precise estimate of his Human Life Value (HLV)—the amount required to secure his family’s financial future.

If you’d like a copy of this Excel sheet to calculate your own HLV, just drop a message!

Medical emergencies are one of the most common reasons people deplete their savings. Having adequate health insurance ensures your wealth remains intact even during a health crisis.

How Much Health Insurance is Enough?

• A base policy of at least ₹5-10 lakh is a good starting point for most individuals.
• For added protection, consider a Super Top-Up Plan, which enhances your coverage at a fraction of the cost.

Example

• A base policy of ₹10 lakh with a super top-up of ₹90 lakh (with a ₹10 lakh deductible) will give you a total coverage of ₹1 crore.

Key Tips for Health Insurance

• Look for policies with cashless hospitalization in a wide network of hospitals.
• Include coverage for day-care procedures and pre- and post-hospitalization expenses.
• For families, consider a family floater policy, which covers all members under one plan.

Think of these three safeguards as a strong shield that protects your financial dreams:

1. An Emergency Fund: Ensures you’re never forced to dip into your investments for unplanned expenses.
2. Life Insurance: Provides peace of mind that your family will stay financially secure.
3. Health Insurance: Guards against rising medical costs that could wipe out years of savings.

By putting these safeguards in place, you’ve not only secured your life but also fortified your ₹10 crore goal. In the next step, we’ll explore how to consistently invest your savings and adjust your portfolio to meet your timeline and aspirations. Remember, the journey to wealth is not just about making money—it’s about keeping it safe while making it grow.