Flame Newsletter - January 25, 2012


Putting off insurance is like waiting for a rising river to run by. The longer you wait, the smaller becomes the opportunity to cross. - Anonymous
Insurance is something that can go a long way in helping our dependants in case anything unfortunate happens to us. However, we often make mistakes such as take insurance cover at a later stage in life where premiums are higher, or we do not take adequate cover. Also, some people do not review or change their insurance cover after their marriage or when they grow their families, resulting in inadequate insurance cover. Ensuring adequate cover for our health, life and belongings can help us and our loved ones lead a tension-free life.
Younger the better for insurance

We often ignore insurance at a young age thinking that we will require it only at a later stage. But what we do not realize is that as the years pass, the premium we are required to pay only rises with our age. That is because the risks to our health also increase as we age. It is always advisable to avail insurance at an early age as the future is unpredictable.
It is not just your health, life or property that can be insured. Many celebrities have insured some individual body parts in case they get damaged or disfigured. Examples are singer Mariah Carey who has insured her legs and football player David Beckham who has insured his legs.
While a lot of us might hold insurance policies, how many of us have the right amount of coverage? Many people do not even know how much insurance should be taken so that their loved ones can lead a comfortable life in their absence. In America, the industry recommended coverage for life insurance is seven or more times the family’s annual income. To make matters simple on the home front, the following article might be able to help…
What is the right amount of Insurance?
'How much Insurance Cover is enough for my family and what policy term should I go for?' are questions that one often ponders while selecting an optimum insurance plan. Before we try to come up with the magic number of what amount and what policy term one should aim for, let's first understand the various factors and variables one should weigh-in to make the insurance cover sufficient.
One comes empty handed to this world, and one will leave empty handed. However, what you can leave behind for your dependents is a sense of security and financial freedom in your absence. Your policy cover should be enough to cover the monthly expenses of your family, account for unforeseen emergencies, take care of your children's higher education and their wedding expenses.
However, even after taking into account these factors, one cannot quickly arrive at a number one should aim at. Calculating the required insurance cover for your family is a logical step by step process which takes into the account the following additional factors:
In case a family loses its bread winner, the policy should replace a greater portion of the monthly income that would have come home otherwise.
How much does your family need a month to live comfortably? This is largely based on the number of dependents at home.
How much time is required, till your eldest child can start earning? The younger your kids higher the policy cover would be required, since you need to sustain them those many years longer till they are independent.
Other points that need to be considered are how risk prone your lifestyle is, like do you indulge in adventure sports, are you a chain-smoker or drink regularly etc. All these factors increase the insurance cover required since you have a lower probability of living a long life. Also, if you already have assets to your name, then the asset value can be used to bring down the required insurance cover.
Having an insufficient cover is as good as no insurance at all. At the same time, spending all of your monthly savings on a cover that is too much for your dependents is also not good. A perfect balance is required to leave behind a 'I care about you' legacy for your loved ones.
Endowment Insurance
It is a kind of life insurance where a certain sum of money is paid as premium for a specified period of time during which the insurance is covered. The insured collects the face value of such policy at the end of the premium period if he survives beyond.
After 13 rate hikes from Mar 2010 till Oct 2011 to control the demon of inflation and sacrificing growth in the bargain, the Reserve Bank of India decided to gift the markets liquidity by way of a higher than expected CRR cut. The move is expected to infuse about Rs.320bn into the banking system.
RBI cuts CRR by 50 bps; Repo rate left steady
‘CRR’, ‘repo’ and ‘reverse repo’ may just sound like jargon to some of us. However, their importance cannot be undermined in the banking and financial world. Read on to clear your doubts…
What is CRR, repo and reverse repo rate?
You’re making all the efforts to ensure that your current savings will be able to support you and your loved ones in the future and come in handy on a rainy day. But are you taking into account the impact of factors such as inflation and tax on your savings? These might make your actual balance look very different from what you think it will be? Get a better idea using this calculator…
Impact of Tax & Inflation on savings


FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India's spectacular growth story.
In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation's economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL's FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.
Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity
This portal is but one of the various IIFL initiatives that would be part of FLAME.

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