Do you have an action plan insurance?

Published: April 20, 2017 at 9:43 am

Last Updated on

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.

investor-meet

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?

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.

Join our 1500+ Facebook Group on Portfolio Management! Losing sleep over the market crash? Don't! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free! Did you miss out on the lockdown discount? You can still avail it! Follow instructions in the above link!

=-=-=-=-=-=-=

Kolkata DIY Investor Workshop May 28th, 2017

Register for the Kolkata DIY Investor Workshop May 28th, 2017

You Can Be Rich Too With Goal-Based Investing

You can be rich too with goal based investing is my new book with PV Subramanyam. If you have not yet got the book, check out the reviews below and use the links to buy.

Reader Quotes:

Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read

The best book ever on Financial Freedom Planning. Go get it now!

Your first investment should be buying this book

The (nine online) calculators are really awesome and will give you all possible insights

Thank you, readers, for your generous support and patronage.

Amazon Hardcover Rs. 317. 21% OFF

Kindle at Amazon.in (Rs. 307)

Google
Infibeam Now just Rs. 307 24% OFF.

If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!

Bookadda Rs. 344. Flipkart Rs. 359

Amazon.com ($ 3.70 or Rs. 267)

Google Play Store (Rs. 244.30)

  • Ask the right questions about money
  • get simple solutions
  • Define your goals clearly with worksheets
  • Calculate the correct asset allocation for each goal.
  • Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
  • Learn to choose mutual funds qualitatively and quantitatively.

More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!

What Readers Say


Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only 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
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, 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 199 (instant download)
Free android apps