Insurance and mutual funds (MF) are both a large source of investment but always remember that MF is primarily an investment option, whereas insurance is called risk cover. Risk cover is very important in financial planning.
When your earnings start getting more than the expenses, then you put that money in the investment. The most important in financial planning is how much you are securing your future along with the present. This is important because if something untoward happens to you, the family will not have to go through the financial crisis. This is the reason why the size of the insurance cover should be correct according to the need.
Different types of investments are necessary
Taking insurance to protect the present as well as protecting the future is extremely… what is your insurance (insurance) cover sufficient, know how to find out.
What is the current income
While disguising the insurance cover, keep in mind that your income is presently and this income should continue in untimely so that the family does not face any kind of trouble.
If there is any kind of loan going on or other types of financial liability then it is also necessary to include it in the risk cover.
If children are going to study or they have to get married, then it is necessary to include the expenses involved in this.
At what age are you planning
If age is less then the responsibilities will be more, hence more cover is necessary. If children do not have a responsibility like education, home, marriage, then work can be done even if the cover size is small. However, do not forget that earning an old age is not possible, but expenses continue.
Special planning for every major responsibility
Keeping in mind all these types of responsibilities, plan well for mutual funds, fixed deposits and insurance cover. Decide different investment plans according to different responsibilities. By doing this, financial troubles can be easily avoided.
Know what is thumb rule?
In developed countries, the thumb rule is that your insurance cover should be at least 7-10 times of annual earnings. Meaning, if your annual income is Rs 10 lakh, then the insurance cover should be between 70 lakh to 1 crore. Inflation is a major problem for countries like India moving towards development. Therefore it is necessary to have 10-15 times the size of the insurance cover. Meaning if your annual income is 10 lakh, then insurance cover is required to be 1-1.5 crore.