Income-stability worries trump price rise: Survey
According to a survey conducted by Birla Sun Life Insurance Co. Ltd, 33% find stability of jobs and income as the biggest financial concern in 2017
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About a third of respondents (33%) in a recent survey said that stability of jobs and income is the biggest financial concern for them in 2017, compared to only 12% having such concerns in 2013. According to the Protection Survey 2017, conducted by Birla Sun Life Insurance Co. Ltd, the major financial concern in 2013 was rising prices, with 46% saying it was their primary concern. In 2017, only 13% respondents said so. The 2017 survey was conducted among 1,540 working women and men between 22 and 50 years of age across nine major cities of India.
Increase in costs of healthcare was the second major financial worry, said 22% in 2017 compared to 10% in 2013. Deteriorating value of money and increase in household expenditure are other such worries. However, the survey said, a larger section of respondents are now aware of the need to insure.
Need of insurance: Compared to 48% in 2013, 60% now said they intended to buy life insurance. Also, 50% of those who had life insurance said that they had enough cover, while 41% said they had less than what is required. Financial planners say that the ideal life insurance cover should be adequate to meet the life-long expenses of surviving spouse, education and marriage expenses of children and repayment of loans and liabilities. “This is assessed through two principal methods, need analysis method and income method. In needs analysis, the total needs are aggregated. In the income method, future income of the earning spouse is discounted with a risk-free rate to arrive at the present value,” said Prakash Praharaj, a Securities and Exchange Board of India (Sebi) registered investment adviser (RIA) and founder of Maxsecure Financial Planners.
A rough estimate for adequate sum assured cover can be arrived at by taking 10 times the present annual income of the earning family member. In practice, when consumers buy endowment policies—a combination of savings and insurance, with low insurance cover—we “have found the insurance cover to be less than two times the annual income,” Praharaj said.
While under-insurance may still be an issue, “The positive trend is that with rising awareness and various mass insurance schemes, more people are coming within the ambit of insurance,” said Pankaj Razdan, managing director and chief executive officer, Birla Sun Life Insurance. “Premiums in India today are quite low if you compare globally. As the insured population will increase, premium will (further) go down in the future,” he said.
Term insurance: “(It) is the best option for protection plans. Now a days online term insurance is also becoming popular,” Praharaj said. A term insurance plan, unlike endowment policies or unit-liked insurance, only covers the financial risk from loss of life.
“While a term insurance will provide death benefit protecting future needs of the family, a life insurance with health benefits will take care of the uncertainties arising from critical health issues…Therefore, it is prudent for a person to first assess his needs and then purchase the right life insurance product,” Razdan said.
Retirement planning: Awareness regarding retirement planning is also rising, with 46% saying that it needs to start along with earning. More people are saving and investing larger portions of their incomes. In 2013, 19% had said they saved over 25% of their income; 44% said they do it now.
Praharaj said that inadequate retirement corpus is a major financial insecurity these days, due to increased longevity and rising healthcare costs.
While there is increasing awareness on retirement planning now and some may even think of retiring early, typically retirement planning becomes a priority only in the latter stage of career. In order to achieve your retirement goals comfortably, it is important to start early.
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