MOST individuals do not pay much attention to risk management which is the elementary framework in any investment process. Portfolio risk is different from personal risk, and managing personal risk is the first step in the overall risk management process. A robust financial plan is of no use if adequate risk management is absent and would be felt the most in case of any unfavourable outcome. Today, with information easily available, it is easy to plan risk management and choose financial products accordingly.
Before you take a life insurance term cover, you must list a few elementary points on the need for the cover. Find out how much cover will be required, time period of the cover, who will be the beneficiaries and whether the clause Married Women’s Property (MWP) is noted in the term insurance plan. In fact, MWP Act protects the properties owned by women from relatives, creditors and even from their own husbands and Section 6 of the MWP Act covers life insurance plans. This feature has to be included in the policy before the policy is issued.
However, most people overlook these important aspects and look for cheap term insurance policies. As no returns are available in term policy, taking an adequate term cover often becomes a mental block and is not a good sign of financial risk management.
It is paramount that every individual has health cover. It must be adequate to meet medical expenses and the sum assured must increase with age. Check if it covers room rent, doctor’s fees, pre-hospitalisation and post-hospitalisation needs. An inadequate cover is equivalent to having no cover and you should not ‘miss the wood for the trees’ here. You must ensure that it covers pre-existing disorders and the waiting period is clearly mentioned. Understand the claim process, hospitals covered and cashless facilities.
With an effective risk management process, you can look at managing the other aspects of your life, including investment management in a more controlled and assured manner.
The writer is founder and managing partner of BellWether Advisors LLP