Skip to main content

2016: Clean up your Insurance Closet!

2016: Clean up your Insurance Closet!

This year let’s pledge to clean our Insurance closet which we always keep pending for another time. Have you ever counted how many insurance policies you have – Endowment Plans, Money Back Plans, ULIP’s Home Insurance, and Child Plans, the list keeps increasing so on and so forth. We buy insurance policies on so many occasions.


Like this, many a times you will be forced to buy plans without knowing their true purpose. This New Year we should make an effort to take out all these policy documents from our closet and take a look at them. You should keep the ones which you really need and surrender the ones which are not required. How would you know if the policies taken by you are good or not? There are few thumb rules which you should follow.
1.       Are your policies and their maturity payouts countering inflation? Many a times we take policy just to pacify someone we know and the premium we agree upon is too low, and the maturity amount is really small. There is no sense continuing with such plans and managing them itself becomes a big burden. It is better to surrender them.
2.       Are your ULIP’s giving returns at par with their benchmark? One should always compare their Unit Linked Insurance Plans with the respective benchmarks and see if returns are at par or not. If this is not the case and your plan is not even offering any exclusive feature in terms of insurance cover, then it is better to surrender the plan(please check surrender charges first) and move the money to equity mutual funds.
3.       Are you fully insured as per your human life value? Sometimes even after having 7-8 insurance policies, the cumulative life cover is not even 50% of what we need. One should always check how much insurance he/she needs depending upon family expenses/goals etc. If you are lacking there, it is better to opt for an Online Term plan to get the remaining coverage.
4.       Is the policy maturity date in reference with major life goals? Let’s take an example here, suppose you have bought a money back policy for your Son’s graduation expenses. You should calculate whether the payout dates of your policy are in accordance with your Son’s graduation years. Otherwise, you should assign this policy to some other goal, and make clear plan for funding your kid’s education expenses.
5.       What are the charges you have paid during initial premium payment years? We as human beings have normal tendency not to look into charges which gets deducted from the premium every year. And as soon as Policy Document arrives home, we keep it in our Closet without giving it a closer look. This year, take these documents out and check on the charges. You should also check for how long is the policy deducting charges on your premium amount.
You can also check for online reviews for your policies. There are multiple websites which provide unbiased review on various insurance plans. The key input is that one should always try to keep the portfolio simple especially in case of Insurance. After all, the true purpose of Insurance is to take care of financial expenses of our loved ones in case we don’t see another day. And God forbids if that day does arrive, making them run through the doors of multiple Insurance Companies for small-small amounts is not what we take insurance for.


Charu Hastir, CFPCM is founder member of www.theriteplan.com. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Comments

Popular posts from this blog

What is Financial Planning?

What is Financial Planning?

One of my friends came to my place for a cup of coffee and while chatting over how life is going, where is it heading, he told me that his elder daughter wishes to go abroad for her graduation. And when I asked him that how is he planning to fulfill her wish, he just laughed it off saying that her graduation is 10 years away, why should he get worried about it now. This attitude of his made me think about the importance of planning ahead of our financial goals and how many of us are conveniently ignoring this very fact.
The Term Financial Planning defines itself as planning your finances well. It is a perfect marriage between your finances and your life goals. Efficiently managing your expenses and savings in order to achieve your future goals is nothing but Financial Planning. What are future goals? They differ from person to person. Some might want to take a luxurious trip abroad and some might wish for own home. But there are few goals which might be com…

5 ways to trick yourself into Saving Money

Saving money has always been a daunting task and most of us fail miserably at it. One can relate more to this after seeing the average savings contribution. Lavish vacation or a fancy car can always distract us from our long-term goal of owning a home. It was easier in the earlier times when the life expectancy was lower and there was no need to plan for the long term. But now with increasing life expectancy and rise in the nuclear family culture, it has become more important for us to save for ourselves rather than depending on our Children or the Government.
When it comes to money management, it is indeed difficult to infuse the savings habit if we are a firm believer of You Live Only Once ideology. Nevertheless, savings is important even if your mind stays more on spending rather than putting the money away for your goals. But as they say there is a solution to every problem. All you have to do is to trick your mind into savings. Here are a few tricks to nudge yourself towards th…

Let’s share our financial mistakes This 2017

How many times have we taken an insurance policy because our uncle was the agent. Or how many times have we signed on a document without reading it fully just because the one taking our signatures was a close person. But sometimes sooner or later, we had to pay some price for our stupid financial decisions. This post is all about admitting our financial disasters and learning from them. I want all of us to start this 2017 by consciously agreeing to the wrong we did in the previous year and moving forward with a lesson learnt. Let’s begin with myself – Me despite being a Financial Planner myself, have done a couple of financial mistakes. The worst one being not saving during the initial years of my career. I didn’t start with a great six figure salary, it was nominal. Still, I could have saved with whatever I was earning, but I was so much into spending what I thought was mine with nobody to question me. And Yes, I proudly admit being a spendthrift to the level that I bought a Car wit…