Business Today
Manage your financial risks
In times of economic instability, it is critical to ensure financial safety. Insurance is one way to achieve this. Here are the financial risks you are exposed to and ways to counter them.

In times of economic instability, it is critical to ensure financial safety. Insurance is one way to achieve this. Here are the financial risks you are exposed to and ways to counter them.

Financial Risks At Various Life Stages

Type of risk

Event

In young adulthood

In early married years

In your 40s

In your 50s and 60s

Investment riskLosing money on a bad investment or an inappropriate one.MediumMedium/HighMedium/HighLow
Termination riskLosing your job (not considering the exceptional spate of current job cuts).LowMediumHighHigh
Health/Age riskLosing your job (not considering the exceptional spate of current job cuts).LowMediumMediumHigh
Disability riskBeing rendered physically or mentally disabled and incapable to work.LowMedium/HighMedium/HighHigh
Business liability riskBeing sued for actions while conducting business or in a profession.LowMediumHighHigh
Theft riskProperty being destroyed by accident (fire, storm, etc) or being stolen.LowLowLowLow
Premature deathAccidental or unexpected death occuring during working years.Low/MediumMediumLow/MediumHigh
• Risk is the possibility of the occurrence of an untoward event. Risk can be as small as a child accidentally damaging a vehicle with a ball or as big as a car crash that results in death.
• Insurance can protect your financial interests in the face of risk. You ‘finance’ the risk of loss by paying a premium to the insurer.
• By doing so, you can transfer your risk to the insurer, who will cover the loss due to an untoward event such as fire, natural disasters, accidents and disability.
• The premium depends on the risk and the cover. The greater the risk and larger the cover, the higher is the premium.

The Must-Have Home Covers

Insurance cover

Value (Rs)

Premium (Rs per Rs 1,000)

Annual premium (Rs)

Your asset's value

Your premium

Fire and allied perils to cover building and contents (excluding cash)15 lakh for building and 5 lakh for contents0.65 (for both)1,300  
Burglary and house breaking5 lakh2.401,200  
Appliances and gadgets (electrical, electronic and mechanical)2 lakh2.50500  
Jewellery and valuables1 lakh10.001,000  
TOTAL28 lakh-4,000  

Premium rates are indicative, discounts start from 5% depending on the value of cover.

• Insure your house for what it would cost to construct it, not for the value of the property.
• Insure gadgets at replacement cost, not depreciated value. In case of a claim, you will get a higher amount.
• The contents of the house need to be listed and a value given to each item. For gadgets, mention the model, year and cost.
• You can avail of a discount if you add a personal accident and liability cover to your home insurance.

Calculate Your Motor Insurance

 Example (Rs)Your Car
Ex-showroom price4,28,869 
Depreciated value (less 5%)4,07,426 
Basic premium on third-party cover800 
Insurance for own damage @ 2.6% of the declared value10,699 
Premium for a personal accident cover for Rs 2 lakh100 
TOTAL11,599 

Indicative annual premium for Maruti Swift Vxi in Delhi

• Third-party liability depends on the cubic capacity of your car. It is Rs 670 for less than 1,000 cc, Rs 800 for 1,001-1,500 cc and Rs 2,500 for cars above 1,500 cc.
• You get a discount if the car has an approved anti-theft device or if you are a member of a recognised automobile association.
• The insurance declared value of a vehicle depreciates by 10-20% every year.
• The plastic parts of a vehicle depreciate the most - by 50% in the first year.

Health Savers

• Take a floater policy for the family to spread the cost.
• Choose insurers with wide hospital network affiliations.
• Add critical illness riders to your health insurance plan.

Insurance Tips For You

• Do not insure yourself against risks you can afford to cover. If you have ample savings, you are not going to sink if your computer crashes. So, avoid covering the machine against such minor faults.
• Make sure to cover costly risks. So take home insurance even though the possibility of something going wrong seems remote. An earthquake or a fire can be disastrous for your finances.
• Medical insurance for yourself and your dependants is a necessity for self-employed people or if your employer does not offer you such a cover.
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