Monday, December 20, 2010

About your Insurance Policies

Well, this is not something easy. Yes, we all invest into Insurance policies, for various types of coverages. Right from Life cover to Illness Cover to that of Home and Vehicle. In this article I am primarily focussing on the Life Cover.
A life cover is taken so that , in the case of an eventuality, your dependents are taken care of with the money that one was insured against. Normally the bread winner of the family would invest into such plans. Earlier, or to be specific, LIC agents, would keep a note of all their customers and keep in touch with them. Incase they found that one of their clients have passed away, they would themselves take up the matter and get the money to their dependent.
But those days are gone, when the agents would be loyal to the customers. Today, they keep changing companies, places and even their clients. So basically, you, ie the person who is taking an insurance should keep his/her dependents updated of the Insurance plans taken. So that after an eventuality they know that they have been covered. Having said this, its not easy to tell this directly. I would advice the following, whichever suits you well or all of them.

[1] Tell your main dependent that a particular Insurance has been taken. Direct Approach.
[2] Tell your close friend about all the plans that you have taken. Maybe an office colleague whom you are very close with and normally do all your investment plans together.
[3] Keep all your insurance documents in one place in the house and keep others updated that ALL the insurance documents are in a given file. You need not tell them the details of the investments. They will find out when its needed. This is what I follow.
[4] Send an email to your Dependents and close friend on the policy that you have taken with the policy details and Insurance Company name.

Whichever approach you find easier to follow and practical, please follow the same. If there is any other way you do, then nothing stopping you. But the important part is that, your dependent's should know of all the insurance taken. As thats the only thing that will take care of them in your absence.

Wednesday, December 1, 2010

Retirement Planning

In this article, I am not going to talk about what one should do towards retirement planning, but rather why one should  go for one and what risks one carries.

Gone are the days, that post retirement, the government will pay you all your life. This is the age of private companies and the pay scales are apparently much higher. But unless you dont save up your own money for retirement, trust me, you are going to have a tough time down the line.

If you are working in a private company, the only two places where the company invests for you normally would be in the Provident fund and the Gratuity. Gratuity is given to you, only if you spend more than 5 years in the company. While provident is given to irrespective of the amount of your stint in the company.

What I have observed in today's life is that, with every change or a job hop, one withdraws the PF which had been accrued by the company and ofcourse there are many ways one can spend it. But the problem here is that, this money which was meant for your retirement is no longer available. In simple words, the money which was supposed to be supporting you when you are not working, is consumed during the period where you are earning.

So what should we do ?
Well the answer is simple. Plan for your retirement properly. Investment in various options which are available for retirement planning.
Don't withdraw your PF fund. Just get it transferred from your old company to your new one.  Also note that, if your PF is withdrawn, then there is a tax which is charged on the same.

If you are close to 5 years in the company, then make sure you complete 5 years and claim the gratuity and put it into a good investment instrument which gives a good return.

On what instruments to invest for retirement planning, I will come back on that in my subsequent articles.