Need to secure insurance
Virmani should
streamline her investments by linking them to goals and should buy sufficient
insurance.
Preeti Virmani is a 32-year-old
professional getting a monthly salary of 1.08 lakh. She stays in her own house
and is planning to get married in about a year’s time. She also wants to save
for her higher education in another two years, as well as for retirement. Her
other goals include building an emergency corpus, buying a car and taking a
vacation. However, Financial Planner Pankaaj Maalde suggests she put off the
car and vacation goals till a rise in income. Virmani’s current cash flow
allows her a surplus of 38,555, and along with the existing investment of 14,000,
Virmani can start planning for her goals.
She can start by building the
emergency fund of 3.06 lakh, which is equal to six months’ expenses, by
allocating her cash, debt fund and insurance surrender value. This money should
be invested in an ultra short-duration fund. Virmani also wants to save 5 lakh
for her own wedding in about a year’s time. Maalde suggests she allocate her
fixed deposit of the same amount for this goal and not take any loan for the
purpose. For the higher education that she is planning in two years, Virmani
wants to build a corpus of 10 lakh. This can be done by starting an SIP of 40,000
in a liquid fund or a recurring deposit of the same amount for two years.
Finally, for retirement, Virmani has
estimated a need of 6 crore in 28 years. For this goal, she can allocate her
EPF corpus of 10 lakh, PPF corpus of 87,000 and equity funds of 97,000. These
will yield nearly 1.6 crore in the specified period. For the remaining amount,
she will have to start an SIP of 16,000 in a diversified equity fund to build
the required sum. She should also continue to put in 500 a year in the PPF till
retirement.
For life insurance, Virmani has four
traditional plans of 15 lakh and one Ulip of 7.5 lakh, for which she is paying
an annual premium of nearly 1 lakh. Maalde suggests she surrender all the
traditional plans and stop paying the premium for the Ulip. She should buy a
term plan of 1.5 crore, which will cost 1,250 a month.
As for health insurance, Virmani has
no cover and Maalde suggests she buy a family floater plan of 5 lakh to include
her parents, which will cost her 2,500 a month in premium. In addition to
these, Virmani should buy a 50 lakh accident disability cover, which will come
for a monthly premium of 667.
