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Am I adequately insured? Deepak, 47, Nagpur, Rs 50 lakh term cover, daughter 15.

Milind

Milind Vadjikar  |1219 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 30, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Sep 30, 2024Hindi
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I’m Deepak from Nagpur. I’m 47 with one daughter aged 15. I currently have Rs 50 lakh coverage through my term insurance. Is this enough for my family, or should I enhance it given my upcoming financial commitments?

Ans: Hello;

If 50 L is equal to 10X your annual income and you have made investments to fund your daughter's education and your retirement then no need to top up.

Hope you don't have any ongoing loan liability.

Weigh these factors and seek help from an insurance advisor/financial planner if needed.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 28, 2024

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I am 30 years single. I have no financial commitment of any loan, I have 1.5 Cr in term insurance 5 lacs in traditional insurance. 15 Lacs in medical insurance., I am a minimalist. Can you please thro light on coverage and suggest me should I policies to increase, my sum assured and increase my premium commitment? Will this coverage suffice or should I need to alter
Ans: Given your current financial situation and insurance coverage, here's a breakdown of your existing coverage and suggestions on whether you need to increase your sum assured or alter your policies:

Current Coverage:
Term Insurance: ?1.5 crore
Traditional Insurance: ?5 lakh
Medical Insurance: ?15 lakh
Analysis:
Term Insurance
Current Coverage: ?1.5 crore
Purpose: Term insurance primarily serves to provide financial security to your dependents in case of your untimely demise.
Current Situation: As you are single with no dependents or financial commitments, ?1.5 crore seems adequate for now. However, this amount should be reviewed periodically as your life circumstances change (e.g., marriage, children, significant asset purchases).
Traditional Insurance
Current Coverage: ?5 lakh
Purpose: Traditional insurance policies (endowment, whole life, etc.) combine insurance with a savings component. However, the insurance coverage is typically lower, and the returns are modest compared to other investment avenues.
Current Situation: ?5 lakh is quite low in terms of coverage, but since it’s a traditional policy, the primary goal might be savings rather than pure risk coverage. Given that you are a minimalist and have a substantial term insurance cover, this might suffice, though you could reconsider future contributions depending on the policy's returns and your financial goals.
Medical Insurance
Current Coverage: ?15 lakh
Purpose: Medical insurance covers hospital bills and other medical expenses.
Current Situation: ?15 lakh is generally sufficient for most medical emergencies in urban India. However, given the rising cost of healthcare, you might want to consider adding a super top-up policy to increase your coverage at a lower cost.
Recommendations:
Term Insurance
Maintain or Slightly Increase: Your current coverage of ?1.5 crore seems adequate, but if you foresee significant financial responsibilities in the future (like marriage or starting a family), you may consider increasing it slightly, say by another ?50 lakh to ?1 crore, to keep pace with inflation and future liabilities.
Traditional Insurance
Reevaluate: Traditional insurance policies are not typically the best for maximizing returns. If your primary goal is to save and grow your wealth, you might want to focus more on pure investment products (like mutual funds, PPF, etc.) rather than increasing contributions to traditional policies. Consider surrendering or converting this policy depending on its terms and the financial implications.
Medical Insurance
Consider a Top-Up Plan: While ?15 lakh should suffice for now, healthcare costs are rising rapidly. You might want to consider a top-up or super top-up plan that can provide additional coverage (e.g., ?10-15 lakh) for a relatively low premium, ensuring you are well-protected against major medical expenses.
Overall Premium Commitment:
Given that you are a minimalist and have no financial dependencies, you should focus on maintaining a balanced approach:

Avoid Over-Insuring: Since you currently have no dependents, over-insuring might lead to unnecessary premium outflow, which could otherwise be invested for growth.
Focus on Investments: With your minimalistic lifestyle, channeling more funds into savings and investments might provide better returns over the long term, enabling you to meet future goals like retirement or potential family responsibilities.

Your current insurance coverage seems adequate for your current situation. Consider a slight increase in term insurance, add a top-up to your health insurance, and reevaluate your traditional insurance policy. Focus on growing your wealth through investments rather than significantly increasing your insurance premiums at this stage. Regularly review your coverage as your life circumstances change.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Milind

Milind Vadjikar  |1219 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 16, 2024

Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Nov 29, 2024Hindi
Money
Hi Sir, I am Gourav 40 Year old I have a monthly in hand salary of 67,000 INR. I have a Home Loan outstanding of Rs 950000 and EMI on That Rs 11000 Rate of 9.85%, having a personal loan of rs 150000 and Emi on that rs 9000 other expenses for 20000. I Invest MF SIP 23000/Month, lic of children 1000/month , 1726/per month is Term insurance plan , please suggest is I am doing right or some thing have to change in my plan.?
Ans: It’s commendable that you have a structured financial plan. Your disciplined approach is evident in your consistent investments and commitments. Let’s evaluate your financial situation and make necessary improvements.

Current Income and Expense Management
Your monthly in-hand salary of Rs 67,000 provides a solid foundation.

Home loan EMI of Rs 11,000 (at 9.85%) and personal loan EMI of Rs 9,000 are manageable but significant.

Fixed expenses like loans and insurance account for Rs 21,726, leaving Rs 45,274 for investments and other expenses.

Your monthly household and lifestyle expenses of Rs 20,000 are reasonable given your income.

Strengths in Your Financial Plan
A disciplined SIP of Rs 23,000 shows a strong focus on wealth creation.

Allocating Rs 1,726 to term insurance reflects good risk management.

LIC policy for your children at Rs 1,000 per month is a thoughtful step.

Loan Management
Home loan: Consider prepaying the loan partially when you receive bonuses or increments. This will reduce interest burden.

Personal loan: This loan has a high-interest rate compared to your home loan. Prioritize repaying this early. Use any surplus or low-risk investments to clear it sooner.

Avoid taking any new loans unless absolutely necessary.

Investment Analysis
Mutual Funds
Your SIP allocation of Rs 23,000/month is impressive. Ensure it is diversified across large-cap, mid-cap, and debt funds.

Actively managed funds offer better returns compared to index funds. They are handled by expert fund managers, which helps in better stock selection.

Consider consulting a Certified Financial Planner for periodic portfolio reviews.

LIC Policy
Review the LIC policy to understand its returns and benefits. If it is not giving sufficient returns, consider surrendering and reinvesting in mutual funds.
Term Insurance
Your Rs 1,726/month term insurance plan is vital. It provides financial security to your family. Ensure the coverage is adequate. Ideally, the coverage should be 10-15 times your annual income.
Risk Coverage and Contingency Planning
Emergency Fund: Maintain 6-12 months’ worth of expenses in a liquid fund or savings account. This will safeguard you during job changes or emergencies.

Health Insurance: Ensure you have a separate health insurance policy apart from your employer’s cover. Family floater plans are a good option.

Additional Insurance Needs: Ensure your personal accident insurance is in place. This adds to your risk coverage.

Tax Efficiency
Investments in equity mutual funds should align with long-term goals to enjoy lower LTCG tax. Gains above Rs 1.25 lakh are taxed at 12.5%.

Debt mutual funds have LTCG and STCG taxed as per your income slab. Consider them for short-term goals.

Section 80C: Maximize tax savings by utilizing Rs 1.5 lakh under this section. LIC premiums, ELSS mutual funds, and PPF contributions can help.

Section 80D: Avail deductions for health insurance premiums paid.

Retirement Planning
It’s crucial to set aside funds for retirement early.

Mutual funds, especially balanced or hybrid funds, can provide steady growth.

Avoid ULIPs or annuities, as they often underperform compared to mutual funds.

Children’s Future Planning
You already have an LIC policy for your children. Review its returns and maturity benefits.

Invest in child-specific mutual funds or balanced funds to build a corpus for higher education and marriage.

Use SIPs for long-term goals. They ensure disciplined investing and rupee cost averaging.

Improvement Areas and Suggestions
Focus on repaying high-interest loans like personal loans first.

Increase SIP allocation when your income increases.

Review your mutual fund portfolio annually to ensure it aligns with goals.

Diversify your investments beyond equity, such as debt funds or fixed deposits for short-term goals.

Final Insights
Your financial planning shows discipline and foresight. By fine-tuning loan repayment and investment strategies, you can achieve your goals faster. Regular reviews with a Certified Financial Planner will help optimize your plan. Stay committed to your financial journey and avoid impulsive expenses.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2025

Asked by Anonymous - May 13, 2025
Money
Greetings!!!! I am 43 years Old, I had started 10k per month TATA AIA SIP in previous year for total 7years Plan. I want to education plan for my 1 kid who is 6 years old now. Please advice and guide me about more investments plan, as i am still confused about future growth and any plan for my wife age 38years.
Ans: You're at a critical financial stage. Planning for your child’s education and securing your family’s future are both top priorities. You've already started a ULIP, which is a start. But let’s take a deeper 360-degree view of your situation.

Below is a detailed plan, broken into simple sections for better clarity.



Assessment of Your Current ULIP Investment

You're investing Rs. 10,000 per month in a 7-year ULIP.



ULIPs mix insurance with investment. That reduces the growth power of your money.



Charges like premium allocation, fund management, and mortality charges reduce returns.



Your actual invested amount is much lower in the first few years.



ULIPs have limited flexibility in fund switching and partial withdrawal rules.



Maturity benefits are taxed if the annual premium exceeds Rs. 2.5 lakh. Be cautious of this.



A ULIP is not ideal for education goals or long-term wealth building.



As a Certified Financial Planner, I suggest surrendering this policy and moving funds to mutual funds.



You can continue till 5 years to avoid surrender charges if already started.



But do not renew after the 7-year term. Don't increase contributions in this ULIP.



Planning for Your Child’s Higher Education

Your child is 6 years old. You have around 11-12 years.



College education in India or abroad can cost Rs. 30–60 lakhs or more.



Instead of ULIPs, invest in diversified mutual funds. This will give better inflation-adjusted returns.



Use a mix of large cap, flexi cap and small cap mutual funds.



Start SIPs in these funds with a long-term horizon of 10-12 years.



You may also consider goal-based child education funds that are actively managed.



Don't invest in direct funds. They look cheaper, but don’t offer guidance.



Always invest through a Certified Financial Planner via a regular plan.



Your investment will stay aligned with your goal as the planner will guide with rebalancing.



Use a dedicated SIP only for child’s education goal. Don’t merge it with retirement planning.



Suggested Action Plan for Child’s Education

Shift future contributions from ULIP to SIPs in active funds.



Start with Rs. 20,000 per month SIP only for education.



Review this SIP every year and increase it by 10%-15% annually.



Add lump sums like bonuses or yearly increments into the same goal fund.



In the last 2 years before the education goal, shift to debt funds slowly.



This will protect your accumulated amount from equity volatility.



Investment Plan for Your Wife (Age 38)

She has a long horizon. She can invest for both retirement and her independent needs.



Open a separate mutual fund folio in her name.



Start SIPs in flexi cap, large & midcap, and hybrid funds in regular plans.



You can start with Rs. 10,000 per month and increase gradually.



You may also use her PPF account for additional tax-free corpus.



Avoid investing in gold, insurance policies, or real estate for her.



Ensure she has her own health insurance and a term insurance if she’s working.



If she’s not working, then create an emergency fund in her name.



That gives her independence and safety if she needs cash.



Family Protection with Insurance

You did not mention your term cover. You must have it if not already.



Ideal cover should be 15–20 times your yearly income.



ULIPs or LIC endowment policies should not be considered for protection.



Avoid investment-linked insurance plans. Keep insurance and investment separate.



Review your existing insurance covers. Add riders like critical illness and accident if needed.



Tax Efficient Planning

Use Section 80C wisely. Don’t just rely on ULIP or LIC plans.



Max out PPF, ELSS mutual funds, and children tuition for tax saving.



Invest in actively managed ELSS funds for better returns than ULIPs.



Avoid index funds for tax planning. They may underperform in volatile markets.



Debt funds are taxed as per slab now. Use carefully if short horizon.



Track capital gains if you sell mutual funds. Use new tax rules for equity funds:



  - LTCG above Rs. 1.25 lakh taxed at 12.5%

  

  - STCG taxed at 20%



Plan redemptions well in advance to manage taxes efficiently.



Retirement Planning (For You and Wife)

Start a separate SIP for your retirement corpus. Do not merge with other goals.



You have 17 years for retirement. That’s good for wealth accumulation.



Invest in a mix of actively managed flexi-cap and large-cap funds.



Add hybrid funds to reduce volatility as you near retirement.



Continue EPF, and increase VPF if possible. It is tax-free and safe.



Don't consider NPS if liquidity is important. Maturity rules are rigid.



Use mutual funds with regular advice to stay on track till age 60.



Exit ULIPs and Poor Insurance Products

You mentioned TATA AIA ULIP. Continue for 5 years to avoid penalty.



After that, exit and move funds to SIP in mutual funds.



If you or wife have LIC endowment, Jeevan Saral, or ULIPs, surrender them.



Reinvest maturity amount into SIPs in regular mutual fund plans.



Do not fall for insurance agents who pitch plans as tax saving or guaranteed.



Emergency Fund and Liquidity

Keep at least 6 months of family expenses in a liquid mutual fund.



Don’t use your SIP or education fund as emergency source.



You may open a separate savings bank linked sweep account for this.



This fund will help if there is any job loss, health issue, or urgent need.



What Not to Do

Don’t invest in new ULIPs or insurance-linked plans.



Avoid direct mutual fund investments. You won’t get guided rebalancing.



Do not use your child’s education fund for house down payment.



Don’t pick index funds. They underperform in sideways or bear markets.



Don’t buy land or gold as an investment for your goals.



Final Insights

You are at a very strategic life stage. You have time and income strength.



ULIPs will not help you grow wealth. Shift to goal-based mutual fund SIPs.



Separate goals: child education, your retirement, wife’s security, and emergencies.



Invest only through a Certified Financial Planner for customised long-term support.



Review all goals every year. Increase SIPs with income.



Protect family with pure term insurance and health insurance.



Focus on building wealth in regular mutual funds, not through insurance products.



Real financial freedom comes when goals are funded without stress.



You have a clear head start. Use it with discipline and right guidance.



Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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