Last Updated on December 19, 2021 at 11:43 am
If we wish to build the financial well-being of our family, one of the first things to do is to protect it. With life insurance, in case the breadwinner(s) die; health insurance, in the case of a hospitalization; an emergency fund, to handle unexpected expenses; an accident insurance to cover of temporary or permanent loss of income due to accidents; invest right for inflation protection (or inflation insurance). There is one more form of protection that we often neglect to consider – action plan insurance. In this post, I discuss why it is crucial.
I use this slide in the investor workshops. Our family is at the centre.
Suppose you have finished steps 1 to 5 mentioned above, identified your goals and are investing for them. Is there anything more to be done?
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Couples manage money in different ways. In most “real” Indian households, it is the “man” who controls the money (whether he is the breadwinner or not!). Even if there is no “control” involved, it is only one spouse who is interested in money management. The other is either not interested or happy to watch.
Often the wife (typically, but not always) only has a “broad” idea of what is going on, without intimate knowledge of details. It is possible for bad things to happen to the main money manager and the spouse is left with a complex system to make sense of. It need not always be negative developments like death or incapacitation. You could suddenly get a big promotion, in a new city. Suddenly you could get hard-pressed for time. The point is that we need a plan, in case life throws a doosra at us.
We need to prepare a clear money-management document that has to include items like
- which document is where;
- summary of holdings;
- asset allocation and assumptions for each financial goal
- premium due dates;
- how to pay on line;
- how to buy/sell on line;
- a clickable link to freefincal.com 🙂
It should include the names of people (relatives/friends/professionals) who can be contacted for advice.
Even if one can handover the portfolio management to a SEBI Registered fee-only financial planner, such an action plan document is necessary if the money manager changes abruptly.
Action plan insurance assumes the presence of an investment plan/strategy. Once that is decided, it must be insured against unexpected events. Think of it as a living will for your money.
Such money management insurance is necessary even after the death of the primary breadwinner (or money manager).
All of us recognize the importance of a will (even if most of us don’t get one!). The will is a legally binding document that dictates “who gets what and how much”. So a combination of nomination and a will would ensure that the term insurance payout reaches the right hand. However, that is not enough.
Bereaved family members may not be able to think straight and could take hasty decisions with the money. The insurance agent uncle who could not sell you a policy could get lucky! It is important that your hard-earned, hard-managed money is continued to be managed right even after you are not there.
Therefore, an action plan insurance should also include clear suggestions as to how the corpus should be managed and an inflation-protected income generated from it, preferably with the help of a fee-only financial planner.
These are only suggestions and not legally binding. But they are likely to be emotionally binding – more powerful!
You can use this life insurance calculator to decide how your term insurance sum should be deployed.
Create your own action plan document today! All it takes is a bit of time and commonsense.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter with the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)