Family finance: Why salaried Bhatia doesn't need
life insurance and can meet goals easily
Deepak Bhatia, 56, lives with his 52-year-old
homemaker wife and 23-year-old daughter, while one son is married and settled
abroad. He gets a monthly salary of Rs 2 lakh, and along with rental income and
annual bonus, his monthly income comes to Rs 2.7 lakh. His portfolio includes
property worth Rs 2.7 crore (self-occupied house and two other properties),
cash of Rs 10 lakh, debt worth Rs 60 lakh in the form of gold and fixed
deposit, and equity worth Rs 95 lakh in the form of stocks and mutual funds.
He
has no liabilities and his net worth is Rs 4.3 crore. After considering
household expenses and insurance premium, he is left with a surplus of Rs 1.6
lakh a month. Bhatia’s goals include building an emergency corpus, saving for
his daughter’s education and wedding, and his own retirement in another four
years.
Financial Planner Pankaaj Maalde suggests that Bhatia start by building an emergency fund of Rs 6 lakh, which is equal to six months’ expenses, by allocating a portion of his cash and investing it equally in liquid and arbitrage funds.
Financial Planner Pankaaj Maalde suggests that Bhatia start by building an emergency fund of Rs 6 lakh, which is equal to six months’ expenses, by allocating a portion of his cash and investing it equally in liquid and arbitrage funds.
To fund his daughter’s education in a year, Bhatia
has estimated a need of Rs 80 lakh. For this, he can allocate his cash and
fixed deposit, and invest the surplus of Rs 1.6 lakh in a liquid fund for a
year. For the daughter’s wedding in another five years, he can assign his gold
and start an SIP of Rs 1.6 lakh in a balanced fund after a year when the
education goal is complete.
For his retirement in another four years, Bhatia
will need Rs 3.65 crore considering his current household expenses of Rs 1 lakh
a month to last him till his wife is 80 years old. To meet this goal, he will
need to allocate both his properties bought as investment as well as stocks and
mutual funds. These are likely to grow to the specified amount in the given
period and no fresh investment is required for this goal.
Bhatia has no life insurance and, according to
Maalde, he doesn’t need any as per the need-based theory. He has no liabilities
and has enough assets to secure his wife and daughter after him. Since his wife
is a homemaker, she too does not need any life insurance. As far as health
insurance is concerned, Bhatia has a Rs 25 lakh family floater plan, for which
he is paying an annual premium of Rs 47,000. Maalde suggests that he continue
with this plan and does not need to buy any more health insur ..
