Insurance in Financial Planning - Importance of Managing Investment Risks

Insurance certainly plays an important role in the financial planning process in the context of the managing of one's investment risks. In financial planning, a logical step to improve and increase one's net worth is to indulge in a careful and a well implemented investment plan. You would required time to be on your side and also the patience not to plunder into your stockstackup.com" title="investments">investments long enough to allow them to grow through compounding.

However, we do know that unforeseen events do happen. It is therefore sensible and pertinent to take the necessary precaution in managing your investment risks by including the relevant insurance policies into your financial portfolio. Purchasing the right type of insurance is of paramount importance and certainly a necessity in ensuring and achieving success in your financial goals and objectives.

Two very important insurance policies recommended in your financial investment plan portfolio and the reasons for their recommendation are stated below:

1. Term Life Insurance with TPD (Total Permanent Disability) rider.

"Buy term and invest the difference in a diversified portfolio of long term investment instruments" is the call of most well meaning financial planners. The reason for it is that term life insurance is the cheapest form of life insurance in the market and the purest form of life insurance with a protection element only without any savings features built into it. Therefore, a term life insurance policy provides more protection coverage for a smaller annual premium. This will allow you to stretch your insurance dollars the furthest and to invest the difference in savings and investment vehicles that have higher long term historical returns. A term life insurance policy with a TPD rider will provide pure protection in the event of death and also in the event for total disability.

With the right amount of term life insurance in place, you will be able to allow sufficient time for your investment portfolio to mature to achieve your financial goals within the period before the term insurance policy expire.

2. Medical Insurance

A financial plan with the intention of managing your investment risks will not be complete without a medical insurance policy with critical illness coverage and hospitalization and surgical (H&S) coverage. A financial investment plan can be derail if one should suffer the tragedy of succumbing to any life threatening illness such as cancer, diabetes, etc causing the person to lose his job and income before the financial goal of his investment plan materialize. The cost of treatment which may be exorbitant from the hospital expenses and surgery needed would cause you to use up the emergency funds and in the worst scenario may require you to withdraw from investment program before it mature if a medical policy was not purchased earlier.

The quantum of amount of term and medical insurances required will depend on the individual needs and financial dreams of the individual.

There are other types of insurances for a more comprehensive financial program but the above two types of policies above are certainly vital in the managing of your investment risks. It certainly is a folly to ignore the importance of insurance in the financial planning process.

For related articles, check out Jeremy's blog on Financial Planning Guide at http://financialplanguide.blogspot.com

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Financial Planning For Retirement In India

Retirement is a financial challenge for most in India. What one saves through working life can seem less than adequate for the 'peaceful' years of retirement. Increasing life spans make it critical for people to plan for 25 + years of retirement, inflation continues to erode savings and interest rates continue to moderate as the Indian economy matures. What should you do if you are intent on having a pleasant retirement ?

1. Set your target: It is important to know what amount of money, in today's terms, you would need at your retirement. For example, if you are 35 years of age and think that Rs 25,000 per month (in today's terms) is a good sum for retirement, plan to retire at 65 and hope to live till 80, then you can expect to require close to Rs 1,10,000 every month in the 66th year. This is simply because inflation continues to lower the purchasing power of your money. To get to this number, you should plan to have savings of approximately Rs 2 crores (Rs 20 million) by the time you retire. If you want to maintain your lifestyle, this pool needs to be closer to Rs 4 crores (Rs 40 million) in your 80th year !

2. Start young: Only way to do this is to start young. A typical rule of thumb is to save up to 30% of your gross salary through your working life. Compound interest helps the savings pool grow in a healthy way even as your earning and savings power increase over the course of your career.

3. Create a portfolio: Build a balanced portfolio throughout your life. It should have a good mix of real estate, stocks, mutual funds, bonds, deposits and possibly gold. The riskier assets like stocks and and equity based mutual funds could form larger portion of your portfolio when you are younger (say 70%) and move to a more stable portfolio as you arrive into your 50s (deposits, real estate and bonds forming most of your portfolio). Many people forget to create a portfolio and put all their eggs in one basket - typically real estate !

4. Leverage early: Another way to create wealth over the longer term is to take loans wisely. Home loans are an important instrument that one could use from fairly early in life. It has been observed in most developed countries that people build property assets by taking loans and upgrading throughout their life. Home loans also offer tax advantage. While home loans can be useful, excessive debt on credit cards, personal loans or margin lending (against stocks) can be dangerous - use such debt only with care.

5. Manage your portfolio: It is normally wise to take profits along the course of your investment period and reinvest into the lows. While very few can time markets, it is important for investors to remain flexible in terms of liquidating assets, booking profits and waiting to pick new assets at the lower end of price cycles. Being brave is key, especially in turbulent economic times.

6. Plan tax wisely: It is important to plan taxes well. There are approved tax breaks like the ones on home loans and 80c that should be considered carefully. In closing, it must be highlighted that the above ideas are just pointers. It is important that you seek advice on your finances and taxes from professionals early on. Should you find good ones, there may be a chance of getting to the number !

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Apt Financial Planning Investment Can Give You the Much Needed Financial Freedom

With the advent of advanced technologies, our country is fast becoming westernized with a strong influence of financial freedom beckoning it. Every individual is busy in chasing his/her own dream of becoming financially independent and one vital step toward accomplishing this aim is suitable financial planning investment.

There is no trace of nervousness or anxiety in folks who are currently employed but once the employment phase is over, folks start questioning their financial status and how they can lead a life not dependent upon anybody.

This leads to a situation where people are forced to lead a life with reduced standard of living after retirement. A situation like this can easily be avoided if professional services of a financial advisor in India are hired before it gets too late. Life won't become dependent and distressed if proper planning is done regarding financial status and future planning.

The need to financially plan your life well in advance arises because of the unstable and turbulent market conditions. As inflation is rising steadily year after year, the prices of essential products are rising gradually. The same product that we bought at a price this year is bound to get pricier the next year but post retirement life would not see a rise in income level. This particular reason may also prompt folks to take up financial investment planning well in advance.

Another reason that poses a hindrance to people who want to aptly plan their finance is the notion that apposite financial planning requires huge capital investment. This is not completely true as no sum is small enough that cannot contribute to financial planning. One can seek counseling and services of a financial advisor in India to devise a plan which are specific and customized for their type of needs and requirements.

It is imperative to consider factors like years of tenure left in a profession, current income, liquidity, safety, setting aside finance for future uses, tax advantages etc. It is always better to start young when it comes to financially plan your life. Plan your goals well in advance and start working towards them. Investing in property is one of the lucrative and alluring options that will reap rich dividends in future.

Suppose there is a professor somewhere in Rajasthan who is going to retire in a few years and has not started financial planning of his future life. He needs to consult an expert financial advisor in India who can proffer him with a wide array of ideas as to where to invest. Some of the advices might sound like investing in property around Jaipur or affluent Bharatpur investment.

Saurav Kumar Kool providing Financial Planning Investment, and Investment Bharatpur

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