The cost of insuring your life going up? – Money Bites Newsletter 19 Mar

Money Bites

Short bites to keep you informed of matters that impact your wallet and wealth

Hey there,

Hope you are doing great!

The active cases of Covid 19 in India look to be on a rise again. We hope you are taking necessary precautions and staying safe. The govt has introduced a vehicle scrapping policy in a bid to increase the purchase of fuel-efficient vehicles. What do you think about it?

Top Bite this Week

Term insurance policy premiums are set to go high in April

What’s going on here?
Premium amounts on term insurance policies are going higher by 10-20% from this April onwards

Why are the premium prices going higher? What’s changed now?
Term insurance policies are pure life insurance products where fixed premiums are paid over a period of time and there is guaranteed payment of the pre-fixed amount in case of death of the insured.

Just like you get an insurance policy to provide financial security to your family members in case of any eventuality, insurance companies get a cover for themselves from reinsurance companies. With Covid is still in the picture and higher than expected death rates among the policyholders due to Covid, the reinsurers have upped their rates for reinsurance from April. The reinsurance companies generally spread out their risks across geographies but with the pandemic, this ability has been greatly reduced.

The term insurance policies are linked to the life expectancy and the quality of life in a country. Over the past few years, the premiums have been on the decrease due to cheaper pricing in India. The policy premiums on term insurance are one of the cheapest compared to developed countries like the US or Singapore.

Should you buy term insurance policies now that the premiums could go up?
Term life insurance policies should form the base of your insurance portfolio. It’s a general feeling among us Indians that payment of premiums on insurance policies that don’t give any money back is a waste of money. No wonder life insurance penetration in India is lower than the world average.

As a first step, you should assess your need for life insurance which should include taking into account the number of dependents, your liabilities, your monthly income, etc. If you do not hold adequate life insurance, you can consider buying fresh insurance before the rates go up after carrying out a comparison of factors like claim settlement & solvency ratio of the insurance company. After all, who would like their dependents to face issues in case of an eventuality?

You Ask – We Answer

Which gold fund SIP should I choose and how much should I invest? – Manav Saini

In the last issue of our newsletter, we spoke about why the gold prices are going down and if you should buy gold. We chose to feature one of the many questions that we have received about investing in gold.

Investing in gold through a gold fund is a very intelligent way of investing in gold, as the investment is held in digital form. You can forget about all the concerns of holding physical gold like security, quality, etc. Gold funds invest in physical gold, gold ETFs and in shares of gold mining companies.

There are many gold mutual funds. You should invest in a fund based on its performance, the expertise of the fund manager, expense ratio, etc. If you are a Finity App user, we make this decision easier for you by suggesting research-backed funds.

Generally, gold should occupy not more than 5-10% of your portfolio value. This could depend on many other factors like your perception of gold prices, inflation, your requirement of gold for occasions like weddings, etc.

? Do you have questions on personal finance & investing? Go ahead and ask away in the comments below. Get featured in our upcoming issues.

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We look forward to your thoughts, story ideas, recommendations, or questions. Please write in at moneybites@fisdom.com or in the comments below. Share this newsletter with your friends & family!