Gp Capt Akhil Kumar Singh is an ace pilot of the Indian Air Force. He works hard, plays hard and parties hard. Like everybody else, he has huge dreams for his family – a comfortable 4 BHK flat in Delhi-NCR and a cottage near Dharamshala, his native place. His son is already pumped up to be a pilot, though in a commercial airline, whose training and other costs will be about Rs 1 Crore as on date. Daughter’s dreams are far bigger than her present height of 3.5 feet – it has to be graduation in fashion designing in Paris. And wife has always been sold out on all the exotic places that this planet has on offer to see. Of course, tomorrow’s dreams are not allowed to cast any shadow on the twice-a-week partying of today!
Fortunately, with some support from parents, and some regular money flowing in from sizeable ancestral land, life is good!
So, the expensive flat has been booked, land for the cottage is in the process of acquisition, and some investments are being done to meet the family’s other dreams.
But the disaster…..when it came, came totally unannounced. Nobody could imagine that the air crash from such a low height can cause death too…..
Though AFGIS insurance money will come and other benefits will also be there including the pension, but most of the bulk money received will go off in paying back the loans taken for the flat and the land. Hardly anything will be left thereafter. Selling off real estate, which is really not required for a whittled-down life, is again a nightmare nowadays.
Will all the dreams of the family come crashing down like a pack of cards now?
The constant heightened risk
Armed Forces fraternity faces a constant higher life risk than others. As unfortunate as it is, but it is a fact. Over the years, we all have seen many families facing one or the other financial difficulty if they lose the family’s bread winner. And, this happens despite the support that our unique ecosystem has.
Somehow, each one of us thinks that only others have an untimely death!
In our hey days, we are either unable to imagine or don’t want to think about what life could look like for our loved ones in our absence. Hence, we don’t make Wills, don’t do nominations, don’t plan and in short, don’t give any thought to it – ‘my-life-is-forever’ syndrome!
In fact, most of the people rarely think how their families would fulfil their needs like house, house rent, school or college fees of children, marriages etc in case of such an unfortunate incident.
How to know what more of the safety umbrella is required?
Let us assume a realistic situation.
Your family has a monthly expense of Rs 70,000 per month as of today, you plan to take or already have a home loan of say Rs 50 lakhs and the desired education abroad for your kids costs close to Rs 75 Lakhs per child at today’s value.
Assuming that you both are around 30 years as of now, and assuming a life expectancy of the surviving spouse to be 80 years, we need to account for regular expenses for the next 50 years, plus the cost of education of children, children’s marriages and the home loan. Even after accounting for the family pension, the bare minimum comes to a term life insurance of over Rs 2.5 crores. Count out the covers that you already have – AGIF/AFGIS/NGIS or any other term insurance – from this and there you have the term life insurance required for that safety umbrella your family should have from you.
Please do not count the paltry insurance covers of your ULIPS, ULPPs, endowment policies (money-back plans, huge-return plans, and the likes mis-sold to you some timein your life) etc – they are not the policies for you and your family. They are designed to be your agent’s pension plan!
So, do you need an extra term insurance of Rs 1.75 crores or so, after counting out the AGIF/AFGIS/NGIS? Here comes the role of investments. The existing investments should be counted out from this required cover to include your bank FDs, mutual funds and stock investments, disposable real estate and the likes which are not tagged to any future commitment or liabilities.
Also, it is likely that the surviving spouse has another source of income; in which case, the requirement could come down accordingly.
You can also consider a joint term-insurance plan for couples. More about that, sometime later.
Lastly, what about a cover for you if you are retired or retiring soon. Please remember that everything depends on what are your liabilities balance and what disposable resources you have built up over time to cater for them in case of your untimely demise. If you have been prudent about it and comfortable, you don’t need any insurance cover probably at this age.
So, judge where do you stand and how do you need to go ahead?