We live in a fast world and with all sorts of tension. Hardly anybody will have a normal blood pressure of 120 – 80.
We worry about many things. We are worried about a theft or fire that destroys the household items, an earthquake that destroy our dream home, theft or accident of car, unexpected medical expenses due to any diseases, a stolen and misused credit card, an untimely death that too with a home loan outstanding!
While we cannot avoid such incidents, we can reduce the impact of these on our financial life, if we plan in advance. Please read on how Rahul managed all these worries at a cost of 99/- per day. He is aged 35, married to Anita aged 32 and is having a son aged 3 years. They stay in their own flat, which he purchased recently with a home loan of 25 lakhs.
Rahul insured his house for 30 lakhs (cost of construction) and the contents at home for another 4 lakhs. He prepared a list of all items at home and attached it with the proposal for home insurance. This will help him, in case of any theft or fire. This policy will cover his home against fire, floods, earthquake and riots. The policy also covers loss of contents due to fire or theft. The policy also provides for rent upto 3 months, if his house is damaged and is not fit to stay there. The annual premium for this policy comes to Rs. 4400/- or 12/- per day.
Home Loan Cover
While sanctioning the loan of 25 Lakhs, the bank insisted on a home loan insurance cover. The bank promoted insurance company, offered a mortgage redemption policy for 25 lakhs. The single premium quoted was around 88,000/-. In case of his untimely death, the bank will get the outstanding loan amount from the policy and his family need not repay the loan. He found this policy is costly and so opted for a 25 Lakhs term policy, where the annual premium is around 2600/- or Rs. 7/- per day.
He took a Health Insurance policy, in addition to the cover provided by his employer. This policy will be helpful for him, in case of job changes and more importantly after his retirement. He took a policy with no sublimits and offers life time renewal. This family floater policy of 4 lakhs covers all the 3 members in the family and is costing him around Rs. 8200/- per year or Rs.22/- per day.
He insured his car for the actual cost, as calculated by the insurance company. He opted for a comprehensive cover, which will help him in case of a theft or an accident. This cost him around 8500 in a year or Rs. 23/- per day.
Credit Card Protection Policy
He is on travel atleast 10 days in a month and uses his credit card for booking air tickets and hotel bookings. After hearing about the increased incidents of misuse of credit cards, he purchased a card protection policy. In case he lose his card, all he has to do is to inform the bank about the loss of his card. The bank will block the card from further misuse. The policy covers loss due to any misuse from the time of theft, even before his intimation to the bank. Since, he has opted for a mobile alert facility to his mobile phone he can easily identify any misuse of the credit card. This cover cost him around 1500/- in a year or Rs. 4/- per day.
In addition to the home insurance, he opted for a small locker with a nationalized bank, where he has a savings account. He keeps gold ornaments and important documents there. The charges for this locker is Rs.1000/- in a year or Rs. 3/- per day.
Being the only earning member in the family, Rahul understand the value of life insurance. He has taken a 25 year term policy for 1 Crore. His logic is simple. If he die before his retirement age of 60, Anita will get this 1 Crore. She can get atleast 8 Lakhs as interest, if she deposits it in a bank. This will ensure a decent education to his son and Anita can maintain the same standard of living even in his absence.
He opted for an online term plan which is offering the best rates. The annual premium for this 1 Crore policy is 10,400/- or Rs.28/- per day.
Rahul is now relaxed men with all the above worry factors are addressed. He is now planning to preclose his home loan from his annual bonus and want to start saving for his son’s education and his own retirement.