Women still lag in financial planning

Knowledge of insurance is key for money management

By Author  |  Published: 10th Mar 2019  12:15 amUpdated: 9th Mar 2019  9:59 pm
Women still lag in financial planning

Hyderabad: Celebrations and events relating to International Women’s Day are still on. It is a good thing that a lot of women-centric events are happening. However, when it comes to financial planning, many women, particularly homemakers, are not on the same page as men.

Rajiv Singh, Chief Executive Officer of stock broking business of Karvy, said many women, who earlier were busy with home management, are now looking at money management too. However, financial awareness, which can help one move forward on their own and also steer family towards financial well-being, still remains an unexplored horizon for many. Selection of the product has to be done keeping in mind age, dependents, income, liabilities and other economic factors. Insurance is an essential part of financial planning as it is a risk management tool, in which the insured can transfer the potential financial loss to the insurance company. Insurance is broadly classified as life and non-life.

Life insurance Products

The following are the variants of life insurance products:

Term insurance
These are the simplest form of life insurance and provide life cover with no savings component. As the name indicates, they offer a cover for a fixed term. It can be renewed or discontinued depending on the risk profile. Typically, one should opt for a cover that is ten times the annual expenses.

However, the underwriting rules make it difficult for a homemaker to get a term insurance. The premise for this is that a homemaker does not have an income and, therefore, there is no financial loss to be compensated. Things are improving and there are some term insurance policies available for them. But this is always lower than that of the cover given to the spouse. “Lots of questions are asked while arriving at the sum assured,” says Sai Krishna Pathri, Certified Financial Planner, MoneyPurse.

Whole life policy
This covers the policyholders over the entire life-term. The policyholder pays regular premiums until death and the corpus is paid out to the family. The policy expires only in case of an eventuality as there is no pre-defined tenure.

Endowment plan
Unlike term plans, which pay out the sum assured along with the profits in case of an eventuality over the policy term, endowment plan pays out the sum assured under both scenarios — death or maturity. For this purpose, they have a higher fee or expenses. This results in a higher premium. The returns are an outcome of premiums being invested in asset markets.

Money back policy
A money back policy, which has liquidity benefit, is a variant of the endowment plan. It gives periodic payments over the policy term and is suitable for risk-averse individuals who wish to save through an insurance plan and also maintain liquidity throughout. If the policyholder survives the terms, she gets the balance sum assured and in case of death before the policy term, the beneficiary gets the full sum assured.

ULIPs
The unique feature of these policies is that they are both flexible and protective in nature. The premiums of these policies are used to buy investments asset units. ULIPs can invest in equity as well as debt instruments.

Non-Life insurance policies:

Health or medical
This policy offers protection in case of medical emergencies. In case of illness or an accident, the health insurance policy takes care of the hospitalisation, medical and related costs. The premiums are based on age factors and an individual’s health conditions. Starting early will get a better cover for a lower price. Effort should be on taking critical illness covers or niche policies like cancer care, where the treatment costs are significantly higher.

Motor
Motor, car or vehicle insurance covers all damages and liabilities of a vehicle against on-road and off-road emergencies. It also pays for any third party liability determined by law against the owner of the vehicle.

Property
This provides coverage against risks to property arising from fire, natural calamities or theft. The insurance can be against fire, earthquake, flood or any other condition.

Travel
International travel covers emergency medical expenses incurred when a person is travelling overseas. In addition to the medical cover, this also offers a cover against baggage loss, delay, trip cancellation, interruption, passport loss, personal accidents and financial emergencies.

Commercial
This encompasses solutions for all sectors of the industry arising out of business operations. It covers all enterprises.