Are you insured adequately?

Whenever one talks , discusses or writes about Insurance, a lot of doubt and skepticism comes in our minds.

In fact the fact that you have started reading this post seems to me like an achievement (Ha!)

But on a serious note, Insurance is something one needs to think about at an early stage in life. And most of us do.

I am sure those reading this post are already insured. But what is more important to evaluate is whether we are adequately insured?

In all probabilities , the answer will be a big NO. Most of us are under-insured.

The reason for this is not far to seek.

You have been telling your insurance agent every year that the premium payment is now becoming a burden and hence 'no more policies'. Partially the agents are at fault - since they sell most of their policies during the last quarter of the financial year.

But the reason why premium payment becomes a burden is the 'type' of policies that have been sold to you - we shall go in to this topic of which type of insurance to buy in a later post.

So then how much insurance should we have?

A thumb rule suggests that the minimum life cover that an earning member must take should be 10 times his annual income. So if you earn say Rs 5 lacs annually, the minimum life cover you need is Rs 50 Lacs and so on.

Remember this is bare minimum life cover needed. In individual financial planning, the figures may be much higher than this.

If it seems too high , don't worry. you may consider it as a financial goal you may want to achieve in the next two to three years.

Under insurance still leaves some of the risks in case of an eventuality and hence a review of this every two years is advisable.

My strong belief is that it is YOU who should compute your own insurance needs - not your agent!

CA Rajiv D Khatlawala

Author, FinTrainer and Consultant.