Risk Management is the most important and vital in Personal Financial Planning. Without proper Risk Management financial planning can become hay wire.
Risk management is intended to provide financial security through the use of financial strategies, tools and services. These are used in the attempt to mitigate large financial losses if and when they occur. A comprehensive risk management strategy will include the consideration of personal, property and liability risks.
Every one of us faces the risk every day. while driving the car, crossing the street, eating out in restaurant,breach of trust, causing loss to some one’s property etc,
Managing Risk can be done by several ways once you identify it and quantify it in terms of money.
Ideally, your risk management plan should address all risk factors, including:
The risk of liability Insurance
There are various kinds available.
In Urban areas most of the families where couples both are working and contributing for the income of families. When evaluating the life insurance component of your financial plan, it is important to consider the financial impact of the death of either (and both) spouses.
The first question depends on what you’d like to provide for your family if you die.
Two important factors are
Having enough emergency cash during difficult times can alleviate stress as well as help pay the bills. Regardless of the amount of income you earn or the size of your investment portfolio, it is important to have 3–12 months’ cash available so that Monthly Expenses can be taken care of without stress.The necessary amount is determined by many factors including debt obligations, employment stability, elimination period for insurance policies, and accessibility of other investments. Despite the often repeated mantra about having a rainy day fund,
While risk management planning may be less exciting than planning for your retirement or children’s education, solid risk management protects you, your family, and your assets.
If you are a Business Owner you face an additional Risk.
|Business Event||Possible Financial Impact|
|Loss of Key Person||Key person insurance can help preserve the value of your business and its continuation in the event of the death of a key stakeholder in the company. Replacing the expertise and knowledge of an essential individual can take time and money and can jeopardize the continuity of the business. This can be insured about using “key man or key person insurance”.|
owner dies prematurely
|In this event were to occur, the agreement between two or more business owners specifies that on the death of a shareholder, the surviving shareholders are obligated to purchase the shares of the deceased shareholder.What Can be done? Each shareholder of the corporation is the owner and the beneficiary of a life insurance policy on every other shareholder. If one of the shareholders dies, then the life insurance
proceeds are paid to the surviving shareholders who would each use the proceeds to
purchase the deceased’s shares.
A Health Insurance Policy would normally cover expenses reasonably and necessarily incurred under the following heads in respect of each insured person subject to overall ceiling of sum insured (for all claims during one policy period).
The Sum Insured offered may be on an individual basis or on floater basis for the family as a whole.
Cumulative Bonus (CB)
Health Insurance policies may offer Cumulative Bonus wherein for every claim free year, the Sum Insured is increased by a certain percentage at the time of renewal subject to a maximum percentage (generally 50%). In case of a claim, CB will be reduced by 10% at the next renewal.
Cost of Health Check-up
Health policies may also contain a provision for reimbursement of cost of health check up. Read your policy carefully to understand what is allowed.
Minimum period of stay in Hospital
In order to become eligible to make a claim under the policy, minimum stay in the Hospital is necessary for a certain number of hours. Usually this is 24 hours. This time limit may not apply for treatment of accidental injuries and for certain specified treatments. Read the policy provision to understand the details.
Pre and post hospitalization expenses
Expenses incurred during a certain number of days prior to hospitalization and post hospitalization expenses for a specified period from the date of discharge may be considered as part of the claim provided the expenses relate to the disease / sickness. Go through the specific provision in this regard.
Insurance companies have tie-up arrangements with a network of hospitals in the country. If policyholder takes treatment in any of the net work hospitals, there is no need for the insured person to pay hospital bills. The Insurance Company, through its Third Party Administrator (TPA) will arrange direct payment to the Hospital. Expenses beyond sub limits prescribed by the policy or items not covered under the policy have to be settled by the insured direct to the Hospital. The insured can take treatment in a non-listed hospital in which case he has to pay the bills first and then seek reimbursement from Insurance Co. There will be no cashless facility applicable here.
Insurance companies offer various other benefits as “Add-ons” or riders. There are also stand alone policies that are designed to give benefits like “Hospital Cash”, “Critical Illness Benefits”, “Surgical Expense Benefits” etc. These policies can either be taken separately or in addition to the hospitalization policy.
A few companies have come out with products in the nature of Top Up policies to meet the actual expenses over and above the limit available in the basic health policy.
The following are generally excluded under health policies:
The actual exclusions may vary from product to product and company to company. In group policies, it may be possible to waive / delete the exclusions on payment of extra premium.
No short period policies
Health insurance policies are not issued for less than one year period.
Risk is a natural part of investing, but everyone’s tolerance for risk is different.Understanding your risk tolerance will help you feel comfortable with your investments.
What ever investment you have done are they as per your Risk appetite?
Is the investment asset and your Risk taking tolerance are matching?
Most of the time we remember taking insurance of our car, house equal its value, but we do not consider the insurance of our self equal to our value
Why do we need Insurance?
How much do we need?
What ever we have already taken Is it sufficient?
Is it the right plan?
India is the Diabetic and Cardiac Capital of the world .( crore diabetics in India by 2025
In Urban areas, 32.8% of the deaths occur because of Heath ailments and 9% due to maligns tumors.
30 % of the people who suffer from Heart attack are affected before the age 40.
Over 8 lac people die of cancer every year in India and 7 lac new cases are diagnosed in India every year.
Every 2.5 Mins a person dies of Kidney diseases in India