Insurance Planning

Risk Management & Insurance Planning
“There is nothing certain in the world except death and tax: yet death and tax are uncertain as no body knows when he will die or when the tax will change” – Benjamin Franklin
The need for insurance planning and risk management arises out of uncertainties lurking in the present or distant future. These Uncertainties thereby give birth to RISK.
Risk can vary in its severity, Frequency , Financial or Non Financial Implication but the sole objective of any person is to find ways to effectively manage RISKS which are beyond individual control.
The Risk Management Matrix below clearly illustrates the techniques employed to manage risks.

Insurance is the method of Risk Transfer whereby a group of entities collectively distribute and contribute towards safeguarding an Individual against their Financial / Monetary Risks.

The various types of Risks which an individual or the company has to manage are listed below. These Risks are covered by several plans and schemes by Life & General Insurance Companies.

Life insurance protects or tries to manage the Financial Loss suffered by the Family Members in case of Premature Death of the Earning Member of the Family.
Life Insurance needs of a family can be calculated by several methods like Income Replacement Method or Need Based Method, but the main objective that an individual should look at achieving while taking Life Insurance is that the needs of the dependent family members are met to the fullest.
There are several types of Life insurance policies that are currently available in our markets like,
  1. Term Insurance
  2. Money Back Insurance
  3. Whole Life Policies
  4. Monthly Income Plans
  5. & Unit Linked Plans.

Unit-Linked Insurance Plans (ULIPs)

A unit-linked insurance plan (ULIP) is a systematic investment plan that offers both insurance and investment returns. In addition, ULIPs also offer the policy holder the chance of continuously monitoring, planning, and directing the protection and savings aspects of his policy according to his needs at any point of time. Thus, a ULIP policy is an excellent opportunity for the policy holder to optimise his insurance and investment plan at different stages of his life.

While investing in a ULIP policy, the prospective buyer needs to consider the various charges that will be applicable on the policy, the fund management options offered, and the flexibility features they allow. It is also important to determine the reputation and performance of the products of the company from whom you are buying the policy.

ULIPs are appropriate for people who have basic knowledge of the equity market. A prospective policy buyer would need to research the market. He would also need to understand the features offered by the different policies and their application to his individual needs. Once he buys the policy, he would need to adequately monitor its performance to be able to mould it to his advantage. Those who are not conversant with the financial markets may need to work closely with a consultant to optimise their gain from a ULIP policy.

Child Insurance
Child-specific insurance policies offer a savings plan for parents. They pay returns that are specifically catered to helping the child when he grows up in terms of paying for their education, marriage, etc.

Child insurance policies are broadly of two types. In one, the child is insured and receives a lump sum amount upon his becoming an adult. In the event of the unfortunate death of the child, the nominee would receive the premium along with interest.

In the other type, the parent is insured. The child gets the returns either upon the death of the parent or upon the maturity of the policy. Parents should consider their financial status and the future needs of their child while opting for child insurance.