Importance of insurance for women

Feb 11 2013, 14:03 IST
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SummaryWhile women are taking their own financial decisions when it comes to savings and investments, many donít consider insurance products with any degree of seriousness

Importance of insurance for women: India, over the past two decades since the first wave of economic liberalisation, has seen a great deal of not just economic change but linked societal change as well. This societal change has also remodeled traditional societal models regarding the role of women.

More and more women, particularly in the cities, are becoming financially independent and becoming equal if not dominant contributors to the household budget. The truth is that a lot of women are taking their own financial decisions when it comes to savings and investments.

Despite this, many women do not consider insurance products and plans with any degree of seriousness. Insurance plans are great instruments for protection and long-term savings and can play a very significant role in achieving long-term goals.

Today there are many insurance plans that can help women secure themselves and their loved ones and plan for the future as well. The challenge is where does one start?

A great way to start is to make an assessment of your income, assets (savings and investments) and liabilities (loans). One must factor in the number of dependents into any financial calculation.

So, how does one go about assessing what sort of insurance plans to consider? Let us start from the beginning.

If you have any dependents ó aged parents and siblings ó then it is imperative to have a term plan in your insurance basket. A term plan is a plan that gives your nominees a certain corpus of money in case of death occurring during the policy period. This ensures that your surviving dependents can live the same lifestyle even in the unfortunate circumstance of your death.

A term plan normally gives no money back at the end of the policy period if you survive but it buys a large cover for a relatively small premium payment. There are a few plans in the market that give the sum of all premiums paid back on completion of the policy term. These are relatively more expensive.

How much is enough?

This is where most of us miscalculate badly and under-insure ourselves. A good thumb-rule is to take your gross annual income and multiply it 6-8 times to arrive at a base insurance amount. Add any secured loans (housing loan, auto loan, gold loan etc) and deduct the current life insurance you already have one.

Assume a gross annual income of Rs 6,00,000 with an

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