Myths – It takes time to develop. Years, generations go by, then someday we realize that there are better ways of doing something. Till then it was an accepted practice or habit. We have a natural tendency to follow others who have taken the same path before us. We then don’t ask questions, don’t check facts, simply refuse to see the truth.
Facts – These are plain, simple truth – often backed by mathematical precision. Historical figures, statistics, projections they all may together establish a fact and thereby break a myth, which we had nurtured for long. Facts, by definition, have to be unbiased always and should help us to rectify and take right decision way forward.
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Insurance – Life & Health |
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Myths |
Facts |
| Traditional insurance policies are good investments and will yield me sufficient returns in the future. | Best of such policies are generating returns in the range of 2-4% i.e. negative returns if you consider rate of inflation at 6%. |
| My protection / insurance need is also taken care by these traditional endowment policies. So my family is financially secured now. | Few points to ponder here:
1) Do you really require insurance at the first place? 2) If it is found ‘Yes’, then how much? This calculation of correct cover amount involves detailed calculation of your family’s expense pattern, goals yet to achieve, liabilities as on date etc. Note: Are you buying expensive cover? |
| I had taken Child Policies for both of my child. So, I will never have problems in funding their education needs. | Wake up! Have you really taken effort to find out the current education costs and at what rate they are going up every year? You may also need money at short notices.
So you require building up a corpus with higher returns and offering enough liquidity and flexibility. |
| My Pension Policy, employee benefits and other assets put together should take care of my post-retirement years. | What should be the size of the retirement corpus factoring inflation and tax? How to deploy the corpus so that you earn regular payouts and at the same time it grows at a certain rate? What if you outlive the life expectancy age?
So many uncomfortable questions … Do you have answers? |
| My employer covers me and my family’s medical costs and will continue to do so. | Are you sure? Companies’ policies related to employee benefits may change over time, without taking you in confidence. Have you ever cared to have a look at the ‘exclusions’? Is there any capping over maximum cost that you can incur? Will you be able to get any Health Cover when you turn old? Should you build an Emergency Fund instead?
Remember medical costs at older age can bring serious damage to your retirement corpus. |