1. Type of Risks, you have to Cover through Insurance
First of all you have to make the list of risks which you have to cover from Insurance. Single insurance policy will not helpful to cover all type of risks. To cover some risks is important than any other type of risk.
a) Risk of Life
Life is uncertain. You can say that you will die after 80 or 90 years. Next day accident will sleep you without any alert. So, this risk should give first rank. I know, all we have some dependents. They may be our parents, brothers, sisters, wife or children. Make the list of all dependent members. Calculate their current and future cost of standard of living. Suppose, today your children is consuming Rs. 10000 per month but at the time of higher education, they can consume Rs. 100000 per month. All these costs, you have to pay but due to your die before fulfilling your duty who will pay them. If you did insurance of your life, they can survive by getting money from insurance company without any difficulty. Life insurance policy plans are best for covering these type of risks.
Today, medical expenditure become costly. Suppose, you do not die in accident but you face major operation whose cost is Rs. 500000 who will pay this amount to you. No one but if you can take medical insurance policy, you can use the insurance policy fund for this purpose.
c) Risks to Loss of assets
Risk of loss of assets may be happened due to accident, natural mis-happenings and fire. So, ready for covering this financial loss. You can create reserve from your business or profession income for covering the risk of loss of assets .
2. Calculation the Right Level of Risk Cover
There are many factors, you have to analyze for calculation the right level of risk cover. Every type of insurance policy may have different plans. You can choose best one in each type of insurance policy. This will be suitable for your age, your family profile, your own requirement, your total level of risk and your income level. Concentrate on following point may be helpful :
a) Total amount of immediate financial expenses will your family face upon your death.
b) Total amount of salary is required to meet your current expenses. If we add inflation rate in it what will be total amount which will be require for your family after your death in future?
c) Total amount you want to leave behind to fund your child’s education and other purposes.
3. Insurance Planning in Old Age
At old age, you can take insurance policy for regular donation to charity. In this insurance planning, you have to pay high amount in the form of premium. After your death, insurance company will pay donation to charitable organisation.
4. Target
This is one of important point which should be in insurance policy. What is the target of your insurance policy. You can take insurance policy for pension, for covering financial risk of life, for saving and earning your money, for tax benefits and for higher education for your children. Only after this, your insurance agent can give you good insurance policy. For example, one insurance company provides guaranteed high return on the investment in its insurance plan with any risk. So, you can invest in it, if you want to earning on insurance product.
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