Greetings readers! This week we want to talk about a topic that is normally sold as an investment instrument, but our contention is that it is more of a risk mitigation product. More importantly, it is a necessity in today’s world. Life Insurance We will start with the traditional question that every insurance seller or advertisement around you starts with? You buy an insurance for your car yet not for yourself! Why that blasphemous discrimination? We believe there are two reasons for that: 1. Car Insurance is mandatory! We buy car insurance because its mandatory, otherwise who would pay the hefty premium. Seems justified, right? Well maybe or maybe not! When we talk about paying the premiums for our car insurance, we always justify it with saying what if I meet with an accident and what if my precious car is damaged. The argument is apt and even logical. So, we try to buy the best insurance to cover an uncertain event for our loving car! Unless we just buy it for the sake of it! Which seems right, maybe saves you couple hundred bucks but in the event of a catastrophe proves redundant. 2. We do not want to imagine death for our loves one! Let us be real, we are emotional beings! And Indians having a much closer bond with their family are further swayed away from the topic of talking about life insurance, because it involves imagining killing the bread earner in our family. Now let us ask you the question again? When you are critical for your loving car, why not for your life. The car insurance might save you money on repair. But life insurance safeguards your family! Purpose of Life Insurance The bread earner in a family is the jack, the family is like a ball on a slope and the slope is your current life standard. If the bread earner be it a man or a woman i.e. the jack does not exist, the life insurance is supposed to substitute them as the jack for a family. Harsh and cruel reality of life, but the truth about the need for insurance. In a nutshell, to help a family sustain the same standard of living in the absence of a bread earner. How much do you need? Based on your current lifestyle and family needs, other assets, the amount of insurance may vary. But for a very simple sake we provide you with a formula to determine the amount of life insurance you need. Average Annual Income * 15 Note: The above formula is for a rough estimation and not intended as an exact metric Which Life Insurance to buy The market is flooding with different insurance schemes and each is judged based on the returns they provide. Well to be honest, the publicity of insurance as an investment vehicle is incorrect. Insurance is a risk mitigation product, and not intended to provide you returns. On a brief note, insurance as a concept was started in Britain to safeguard the interest of a group of ship merchants by pooling funds and help a merchant in case their ship was looted or lost at sea. Similarly, insurance is us as a society pooling funds to help an unfortunate family in the event of untimely loss. Owing to the above, insurance buying decision should be governed by social obligation and family safeguard, not to seek any returns on investment! Keeping that in mind, Term Insurance is the only traditional insurance serving the purpose! Non- traditional investment insurances promising returns also end up investing in different financial instruments. By mixing insurance and investment, we are expecting the chef to also act as a mason for our house. Why not let each expert do the job they are the best at! And FYI, term insurance offers a significantly higher life cover at much lower premiums! Our 2 cents Combine a term life plan with a mutual fund for returns. Higher returns and higher insurance cover! MWPA – Married Women Property Act Ladies, this section goes specifically for you, and the loving father or husband! Coming to a topic you don’t find in most conversations by your insurance agent! MWPA or Married Women property Act is a provision that can be attached your insurance to safeguard your wife and children from any sharks. How? MWPA is a very subtle way of keeping the money in your life insurance to be utilized only by your wife and children. When a life insurance is covered in MWPA the beneficiaries are the sole receivers, even if you have outstanding credit or any pending dues. Its like a titanium vault with key given to only your wife and children. Even the parents or relatives can’t claim the insurance benefit in this case. All you must do is request your agent to attach the MWPA addendum to your insurance!