What is difference between sum assured of a certain amount without top-up and same amount with a top-up? Kindly explain pros and cons.

Ans: Top-up policies play the role of an emergency backup policy, when their main health insurance policy cover reaches the threshold of the sum insured. It offers a higher coverage at relatively lesser premium as compared to a base policy with a higher sum insured.

Ever increasing medical inflation and ongoing deadly infection makes it essential to not only have health insurance but also insurance cover with an adequate sum insured.

The need of a specified sum insured can be optimised by breaking it into two policies. One basic and another top up totalling up to sum insured required by you. This option is recommended rather than having a single policy with higher sum insured.

Ans: Hi Prasanna, life insurance protects your family in case of an unfortunate demise of the policy holder. In case of a premature death, while in case of annuity plans, it protects your income if you live longer than the expected term.

Ans: Planning to invest your yearly bonus as a lump sum sounds like a smart move. It offers the advantage of immediate deployment into the market, potentially capturing growth opportunities. This approach also simplifies your investment process, avoiding the hassle of adjusting monthly contributions.

However, keep in mind the importance of diversification and avoiding market timing. Consider spreading your lump sum across different avenues to manage risk effectively. Additionally, reviewing your portfolio regularly and rebalancing if needed ensures alignment with your financial goals.

Whether you choose to invest your bonus as a lump sum or incrementally, staying disciplined and committed to your investment strategy is key. A Certified Financial Planner can provide personalized guidance tailored to your unique financial situation and goals.

Ans: When considering guaranteed plans, it's crucial to tread cautiously. These plans promise security but come with their own set of limitations. They often boast a fixed return rate, but this can be considerably lower than what other investment avenues offer. It's like having a sturdy boat that moves slower than the rest.

One of the major perils of guaranteed plans is their inability to beat inflation. While they assure stability, they often fail to keep up with the rising cost of living. It's akin to being stuck in a time warp where your money loses its purchasing power over time.

Moreover, guaranteed plans usually come with a lock-in period, restricting access to your funds for a specified duration. This lack of liquidity can be a hurdle, especially during emergencies or when better investment opportunities arise. It's like having your money in a vault with the key out of reach.

As a Certified Financial Planner, I understand the allure of guaranteed plans, especially for those seeking a safe haven for their hard-earned money. However, it's essential to weigh the pros and cons carefully. While they provide stability, they may not offer the growth potential needed to meet long-term financial goals.

In the realm of investments, it's often a trade-off between risk and reward. While guaranteed plans offer security, they may not generate returns substantial enough to beat inflation or meet future needs. Diversifying your portfolio with a mix of investments tailored to your goals and risk tolerance is key to financial success.

Remember, it's not about finding the perfect plan, but rather crafting a well-rounded strategy that aligns with your aspirations and circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in