6 steps which can lead you to “Financial Independence”

The Independence Day is celebrated every year on 15th August and this year, the country is celebrating its 71st Independence Day. This day is commemorated as the Independence Day of India as India got freed from the clutches of British rule.

Independence is the essence of life which gives an individual the sense of individuality, freedom and liberation to lead his or her own life within the specified parameters of society, legislation and the constitution.Independence

One such kind of independence is being financially independent. It is as important for individuals to lead a life on their own terms and conditions without  carrying the burden of being dependent economically.

Table of Contents:- 

What is Financial Independence and why it is important?

Tips/Ways that help you attain financial independence

1. Set your goals

2. Achieve higher savings

3. Start early & invest smartly

4. Manage risks

5. Ensure zero debt

6. Build assets

Final Word

What is Financial Independence and why it is important?

Now, what exactly is Financial Independence? Financial Independence means that you have adequate money to survive without further income. To be precise, it means that if you were to quit working today, you would not lose any substantial part of your way of life due to a lack of a working income.Financial Independence is basically a state of having sufficient personal wealth to live your chosen lifestyle, without any need to work regularly to fulfill the basic necessities.

By attaining financial independence, you can enjoy the below mentioned benefits.

Freedom to live on your terms: If your investments give you returns with which you can easily pay your expenses, then you are in a situation to decide your own terms regarding how you work, who you work with, and you are not bound by the employment contracts.

Live your own lifestyle: Having financially independence means you have enough funds to survive, even if you lose your job. You don’t need to rely on unemployment pay cheques that only cover the basic necessities. With financial independence, you can continue to live a comfortable lifestyle.

Extra spending: Your investments and savings can help you realize surplus of income that you would not otherwise receive. This additional income helps you to spend more on your lifestyle or better to invest towards building assets that would also generate income in the near future.

Early retirement: If you can live entirely on income from investments or interests from savings, early retirement could become a reality. Having financial independence can easily afford early retirement.

Peace of mind: If your passive income can meet all your current & future financial expenses, you can enjoy greater flexibility. You are not bound to live a stressed life and live life on your own terms.

Tips/Ways that help you attain financial independence

If you are really looking to accumulate and improve your financial strength, here are the following tips that will help you attain financial independence.

1. Set your goals

Setting goals and having a plan of action is extremely essential to achieve those goals. Unless you know your destination, you will not be able to take a right route, how much fuel you need to reach the destination, etc. The first step towards achieving financial independence is to identify and set your goals. Once the goals are identified, you need to quantify the goals and set the time frame say 3 years, 5 years, 10 to 20 years for achieving those goals. Here, you can set a goal like ‘being financially independent by the age of 45 years’. While setting the goals, don’t ignore the factors that could hamper your move towards achieving it.

2. Achieve higher savings

Once the goals are set, you need to control your expenses. It is advised to spend on things only that you need and don’t make superfluous expenses. You need to first put apart the savings from your income/earning and then consider spending. Impulse purchase should be avoided, as it can hinder you to achieve higher savings. It’s better to make a budget and make expenses accordingly. Also, do regular checks on you/your family’s expenses, so you can have a sufficient amount of money for investments that will help you realize the goals. In case, you are not able to achieve savings, you may think over ways to compliment your existing income. You can get a secondary income by a part time job or work at home/freelance job.

3. Start early & invest smartly

The earlier you start savings and start investing, the sooner you will be able to build your wealth and become financially dependent. As soon as you start earning, you should start investing to achieve your financial goals. Investing your money works in favor of you, as you can earn money from the invested funds.When it comes to investing, you should set a long-term goal that can fuel your investments to grow with the help of compounding. It would be a prudent choice to have an investment portfolio with a good mix of equity, debt and money market instruments, depending on your risk taking capacity.

While you are focusing on investing, don’t forget about tax planning. You are advised to make some investments that help to save tax, pay taxes on time and file returns regularly. You can also consult with your chartered accountant who will help manage your taxes effectively.

If you are seeking for early financial independence (say by 45 years), you need to have the asset allocation as required to meet your financial goal/s. Don’t ever put all your funds in a single asset class, diversify your investments that don’t just let you lose all your investment money, but also ensure decent returns as well.

In case, you want to plan for your retirement, you may invest with pension plans that will ask you to invest regularly and you will receive a lump sum amount at the vesting age and a monthly pension amount is also payable. Investing with a PPF account is also a fair option, when looking to have a backup for your post-retirement life.

4. Manage risks

The next step to climb towards financial independence is managing risks. You never want to get your plan thwarted due to any unforeseen eventuality such as death, health issues or sudden job loss.

Cover life risk: In order to cover death risk, it is advised to buy a pure term insurance plan which at a low premium provides a large life insurance cover. In case, you want to accumulate a corpus amount say after 20 years and in the event of your death, your family may have to face a major financial setback. However, a term life insurance plan secures your family financially and pays a lump sum amount that can help your family to fulfill various financial expenses.

Cover health risk: Health issues may occur to anyone and the hospitalization expenses may burn a hole in your pocket. It is thus always better to get an adequate health insurance cover for yourself and your family. A health insurance plan pays all your hospitalization expenses that you may have to pay from your own pocket, in case you have not opted for a health plan.

A Health Insurance cover does not let your finances destabilize and thus, it plays a key role in achieving financially independence.

Cover job loss: In order to cover the fear of job loss, you may buy a job loss insurance plan. However, it is advised to make a contingency fund that covers expenses for 3 to 6 months, in case of job loss.

Managing the risk triangle of death risk, health risk & job loss will ensure that you are on the right path towards realizing financial independence.

5. Ensure zero debt

Getting out of debt is a major move and extremely essential to fulfill the financial goals. Debts such as loans always hinder your dream of financial independence. With time, you have to take loans to buy a car or home, but you need to clear them off as early as possible. Moreover, the lesser money you pay towards loan EMI’s, the more money you can put towards achieving your financial freedom. If you have investments which gives you back less returns than the interest you pay for making such investments, it would be wise to sell off those investments and get out of debt.Most people owe a huge amount of debt on their credit cards, even without thinking of his/her re-payment capability. In case, you have taken too much of debt on your credit card that you can’t pay, it would be a prudent move to resolve your debt with a ‘settlement’ option.If you have borrowed money from a friend or relative, pay it back to ensure zero debt on your side.

6. Build assets

Apart from investing, it’s also important to build assets such as buying a home. Although, buying a home in a well-developed area is not an easy affair, but having your own home not only gives you a sense of security, but it is also building an asset for you and your family.Inherit assets and not liabilities to your kids.

Final Word

Being financially independent requires investments to be done smartly and in a regular manner over a long period. After all, every freedom movement requires serious efforts and you only need to save and invest to achieve your goals and thereby attain financial independence.

Gift your family the financial self reliance this Independence Day!

Bike insurance is something that most people don’t put a lot of thought into. It is not advisable to always go with the policy that provides coverage at the cheapest cost. It is extremely important to check out the features of an insurance policy and then go for the one which has the most features, even though you might have to pay a little extra for the same.

If budget is your main concern, we can tell you how to purchase the right insurance policy at the cheapest price. In this blog, we have shared some tips that you can keep in your mind while making the decision for purchasing a bike insurance policy within a tight budget.

Consider purchasing a bike which has travelled lesser mileage as compared to something which has travelled a lot. The insurance premiums for bikes less travelled are always cheaper.

Older, smaller and cheaper bikes attract lesser insurance premiums. The cost of repairing and purchasing spare parts is lesser in case of such bikes as well.

Buying modified or unusual bikes is not a good idea if your budget for purchasing insurance is low. Such bikes attract more repairing and replacement costs and attract thieves easily. Naturally, the insurance premiums for such bikes are relatively higher.

Speaking of thieves, it is essential that you keep your motorbike secured at all times. Park your bike inside a garage rather than parking on the road. You can also use chains, locks, etc. for keeping your bike secured.

In case you don’t have a pillion, the insurance will work out to be cheaper for you.

If there have been no claims of the insurance for a few years, the insurance premium would work out to be cheaper.

Pay the insurance premium in one go rather than paying in monthly instalments. In most cases, monthly instalments work out to be more expensive.

At the time of renewal of the insurance, see if similar policies are available with other insurance companies at a cheaper price. It is not necessary that just because you have bought the insurance from one company at the beginning, you have to stick to it forever. Several websites are available where insurance policies can be compared. Do a thorough research before taking the final decision.

However, if you get all your insurance policies from the same insurer, the premium might work out to be cheaper for you. In many cases, insurance companies provide a loyalty discount.

If you are an experienced rider, chances are that the premium will be cheaper for you. Insurance companies see experienced riders as less risky than inexperienced ones. The insurance company will look at your records like tickets and accidents to decide on the premium amount.

These are some of the tips which will help you in the long run. We have other articles on important aspects of various types of insurance. You can browse through our website and learn about various kinds of insurance in details.

Accidents may occur to anyone and you cannot stop it from happening. It is thus better to get a safeguard against personal accident, so your family doesn’t have to suffer in case of an accidental mishap.

Personal Accident (PA) Insurance provides cover to the insured against death or disability arising from an accident. This policy provides monetary compensation, in case of an accidental death and temporary or permanent partial/total disability sustained. It also covers the accidental medical expenses incurred in case of hospitalization due to accidental injuries. A personal accident insurance policy thus provides a comprehensive coverage for you & your family against accidental mishaps.

Table of Contents:- 

Why Buying Personal Accident Insurance is Important?

Upsurge in Road Accidents

Accidental Disability

Loss of Life

Hospitalization Expenses

Worldwide Coverage

What is covered under Personal Accident Insurance Plans?

Accidental Death

Permanent Total Disability

Permanent Partial Disability

Temporary Total Disability

Hospitalization Expenses

Repatriation of Mortal Remains

Additional Benefits under Personal Accident (PA) Insurance Plan:

Hospital Daily Cash

Broken Bones

Child Education Benefit

Ambulance Allowance

Final Word:

Why Buying Personal Accident Insurance is Important?

Following are the key aspects that make buying a personal accident cover an imperative move:

Upsurge in Road Accidents

Indian roads account for the majority of fatalities, as number of deaths due to road accidents are rising rapidly. As per a report from the National Crime Records Bureau, road accidents accounted for 43% of all accidental deaths in 2015. There has been a sudden rise in road accidents in the year 2015 and the number of fatalities and road crashes have been reported over 5 Lacs. The year 2016 has witnessed a steep rise in the number of road accidents. As per recent estimates, on an average 400 people died per day in road accidents last year and about 77.1% of accidents took place only due to drivers’ mistake.

Considering these statistics, getting coverage against accidents has become a necessity. Having a personal accident insurance provides compensation against accidental sufferings.

Accidental Disability

As per rising statistics of road accidents, chances are higher for disability arising from the accident. Moreover, accidents are one of the major causes of physical disabilities.

In case, you are the only bread earning member of the family and you become accidentally disable up to an extent that you lost your earning capacity, it becomes really hard for you to manage the family’s expenses. Having a personal accident insurance will give you a helping hand. This policy provides compensation, in case of temporary or permanent partial/total disability arising from an accident.

Loss of Life

You never know the extent of severity an accident may bring on you. As per government estimates, over 1.4 Lacs people died due to road accidents in the year 2015. Accidental death makes an adverse impact on your family both emotionally and financially. A personal accident insurance will provide financial assistance during this tough time and compensates the family in the event of your accidental death.

Hospitalization Expenses

Accidents may lead to serious injuries that require immediate medical attention and it will put a financial burden directly on your pocket. A personal accident plan provides cover against expenses incurred on hospitalization due to accidental bodily injuries.

Worldwide Coverage

Typically, personal accident insurance plans offer worldwide coverage for the insured person/s against accidental mishaps. In case you are outside India, a personal accident plan will cover the claims for an unforeseen accidental occurrences. It brings ease, while you are on a trip abroad.

What is covered under Personal Accident Insurance Plans?

Personal Accident Insurance Plans offer a set of benefits as discussed hereunder.

Accidental Death

In case of your unfortunate demise due to an accident, the insurer will pay an amount equal to 100% of the sum assured to your nominee/beneficiary. You can avail accidental death cover upon opting PA Plans offering accidental death cover.

ICICI Lombard’s Personal Protect offers an amount equal to Sum Insured on accidental death.

With Religare Secure plan, in the event of accidental death, an amount up to sum insured is payable.

Future Generali’s Accident Suraksha offers Accidental death cover available up to 100% of the Sum Insured.

Permanent Total Disability

It refers to a condition, when an accidental bodily injury resulting to complete the disablement in a manner that you lose your earning capacity. Under this condition, the insurer pays the entire sum assured (as applicable). Most of the insurers provide cover, in case the disablement occurs within 12 months from the date of the accident.

Personal Accident Insurance Policy from HDFC ERGO offers coverage towards Accidental Permanent total disablement up to 100% of Sum Insured chosen.

Individual Personal Accident Insurance Policy from SBI General provides permanent total disability cover up to 100% of Sum Insured.

Accident Guard Policy from Tata AIG provides cover for Permanent Total Disability, when occurs within 180 days from the date of injury is covered up to 100% of Sum Insured.

Under Personal Guard plan from Bajaj Allianz, Permanent total disability is covered up to 125% of the Sum Insured opted.

Permanent Partial Disability

It is a type of disability that caused due to accidental bodily injury, in which you are unable to work at full physical capacity. The insurer provides cover towards Permanent Partial Disability and it pays a percentage of the sum assured as a lump sum or periodic payments, as specified under the plan chosen.

SBI General’s Individual Personal Accident Insurance Policy pays 1% to 50% of Sum Insured or as assessed by the doctor.

Tata AIG’s Accident Guard Policy from offers 1% to 75% of Sum Insured, depending on the disability sustained.

Bajaj Allianz’s Personal Guard Plan pays 2% to 75% of Sum Insured, depending on the disablement.

Bharti AXA’s SmartIndividual Personal Accident Insurance Policy pays 3% to 75% of Sum Insured, depending on the disability.

Note: The benefits payable may vary, depending on the type of disability sustained and as specified under the policy chosen.

Temporary Total Disability

This physical disability refers to a situation, when you become disabled and cannot work for a period of time (specified months or weeks). The insurer provides cover for Temporary total disability and pays a part of the sum assured for a specified time.

SBI General’s Individual Personal Accident Insurance Policy pays 1% of Sum Insured or Rs 10,000 whichever is less. This benefit is payable for a maximum of 104 weeks.

Bharti AXA’s SmartIndividual Personal Accident Insurance Policy pays 1% of Accidental Death SI per week, to a maximum of Rs 10,000 and it is payable for 104 weeks.

Apollo Munich’s Personal Accident Premium Plan pays up to 1% of the sum insured each week and is payable for a maximum of 100 weeks from the date of the accident. It is paid up to a maximum of Rs 15 Lacs. In case, the insured person is disabled from some days less than a week, a proportionate part of the benefit is then payable.

Hospitalization Expenses

A PA plan covers you against expenses incurred in case of hospitalization arising due to an accident. It covers medical expenses, room rent, doctor’s visit, etc. as specified under the policy chosen.

Under Personal Guard Policy from Bajaj Allianz, medical expenses are reimbursed up to actual bills, or 40% of the eligible claim amount, whichever is less.

SmartIndividual Personal Accident Insurance Policy from Bharti AXA offers cover for accidental medical expenses up to 20% of Accidental Death Sum Insured.

Secure from Religare Health Insurance offers cover for hospitalization expenses up to Rs 1 Lac.

Repatriation of Mortal Remains

A personal accident plan provides cover for Repatriation of Mortal Remains, which includes the cost incurred towards the transportation of mortal remains from the place of accident/hospital to the residence/hospital/cremation ground.

Chola Accident Protection from Cholamandalam offers coverage up to 3% of Accidental Death Sum Insured or Rs 6,000 as a lump sum, whichever is less.

IFFCO Tokio’s Individual Accident Insurance Policy offers coverage towards the carriage of dead body up to 2% of Sum Insured or Rs 2,500 whichever is lower.

Personal Accident Premium Plan from Apollo Munich provides cover towards the transportation of mortal remains up to 2% of the Accidental Death Sum Insured, to a maximum of Rs 10,000.

Note: Plans mentioned above is not an exhaustive list. You may refer other plan as well, to get the coverage you are looking for and also don’t forget to read the policy benefits prior buying a plan.

Additional Benefits under Personal Accident (PA) Insurance Plan:

Personal Accident (PA) Insurance Plan provides the option to attach riders that ensures flexibility to customize the plan at the time of buying. The riders can be opted upon payment of additional rider premium and the availability of these riders may differ depending on the plan chosen. These additional benefits may be available as an in-built or add-on benefits with PA plans, depending on the terms specified.

Hospital Daily Cash

It is a fixed benefit payable on a daily basis for each day of hospitalization caused due to an accident. It helps you to take care of additional expenses not covered under your personal accident insurance policy.

ICICI Lombard’s Personal Protect offers Accidental hospital daily allowance payable up to Rs 2,000 per day. It is payable for a maximum of 30 days.

Max Bupa’s Health Assurance personal accident plan pays Daily Hospital cash ranging from Rs 1,000 to 4,000 is payable, upon choosing this additional cover.

Star Health’s Accident Care Individual Insurance Policy offers Hospital daily cash of Rs 1,000 for each completed 24 hours of hospitalization. This benefit is payable for 15 days per occurrence and 60 days during a policy period.

Broken Bones

With Broken Bones add-on cover, you can get cover against fractures or bone damage caused in an unfortunate accident. Insurers pay a fixed compensation, as per the policy chosen.

Cigna TTK’s Lifestyle Protection- Accident Care offers a lump sum amount towards broken bones are payable in a range of 3% to 100% of Sum Insured, depending on the severity of breakage of bones as specified under the policy.

Global Personal Guard Policy from Bajaj Allianz offers Fracture Care which provides cover as 2% to 100% of Sum Insured, depending on the type of fracture resulting from an accident.

Child Education Benefit

In case of accidental death or disability of the insured, the insurer offers a fixed amount or a percentage of the sum insured as an educational benefit for the kids.

Global Personal Guard Policy from Bajaj Allianz offers Children education benefit, in case of acceptance of the claim under Accidental death or Permanent Total Disability. A one-time payment of sum insured towards the cost of education of your dependent children is payable.

Accident Suraksha from Future Generali offers Child Education Benefit. This plan makes payment towards the educational support of the deceased person’s Dependent Child as the sum insured mentioned against this benefit, as stated in the Schedule.

Ambulance Allowance

Ambulance expenses incurred for transferring the insured to a hospital, from one hospital to another hospital or transferring him/her from the hospital to the place of residence.

Individual Personal Accident Insurance Policy from SBI General covers Ambulance Charges as 10% of accidental death sum insured, up to a maximum of Rs 1 lac during a policy period for the expenses incurred towards availing the ambulance service. It also provides Air Ambulance cover.

Global Personal Guard Policy from Bajaj Allianz offers Ambulance Allowance when the Insured has been transferred to the nearest hospital from the spot of Accident by an ambulance or transferring from one hospital to another hospital with higher medical facilities. It also provides Air Ambulance cover.

Final Word:

Personal Accident Insurance Policy is an economical way to avail a safety net against any kind of mishap pertaining to an unforeseen accident. It safeguards you from out of the pocket expenses to deal and combat the expenses related to accidental consequences. Also, the premium is quite affordable as far as benefits are concerned. Various additional benefits could be opted to make the plan tailor made as per your requirement. It is important to read the terms & conditions and then buy a plan that ensures comprehensive cover against all sorts of accidental mishaps.

On 26th January 2001, a massive earthquake hit the Bhuj district of Gujarat and an entire city was demolished within minutes. Similarly, on the 26th December of 2004, India woke up to the shocking story of Tsunami hitting the coastal area and thousands of people lost their lives and their homes to the disaster. Natural disasters can strike anytime. They come unannounced and cause unbelievable losses to the human lives and human habitat. In fact, in one natural disaster, you can lose everything you have ever established in your life.

A natural disaster is any major process which occurs due to a natural process. Examples of natural disaster include floods, hurricanes, tornadoes, volcanic eruptions, earthquakes, tsunamis, etc.

But does this mean you should remain scared all your life? Oh no. Not at all. There is something you can do to protect yourself. Purchase these three types of insurance plans to minimize the financial loss incurred due to natural disasters. 

Term Insurance

The most important loss is the loss of lives. The demise of the breadwinner of a family due to any cause can change a family completely. While a person cannot be replaced in any way, the financial loss due to the absence of a person can at least be compensated. Purchase a term insurance to protect yourself financially. Term Insurance provides high coverage at a very low cost. This policy is meant to compensate you for financial losses. However, one thing you should keep in mind, it does not provide any returns whatsoever. If the policy holder expires during the term of the policy, the insurance amount is paid to the nominee. If the policyholder survives, nothing is paid to anybody.

Home Insurance

After you have protected yourself, protect the roof which protects you and your family. Purchase a home insurance to protect your home from natural calamities like earthquake, storm, flood, fire, etc. Although, the term mentioned here is home insurance, but you can use this kind of insurance for protecting your business establishment as well. A vanilla home insurance usually provides coverage from all the natural calamities except earthquake. For coverage against earthquake, you might have to pay something extra because the premium depends on the geographical location. A home insurance can also protect your property from burglary.

Personal Accidental Insurance

Well, natural disasters don’t just claim lives, they can leave someone seriously injured, temporarily or permanently disabled as well. In such cases, personal accident insurance will come in very handy. So what does it cover? Personal Accidental Insurance basically provides four kinds of coverages – permanent disability, temporary total disability, permanent partial disability and death. Lump sum compensation is provided up to 100% of the sum assured in case of permanent disability or death. In the case of permanent partial disability, a part of the sum assured is paid to the insured. In the case of temporary disability, this kind of insurance offers a weekly compensation up to 104 weeks.

Don’t wait till a natural calamity strikes to feel sorry.

 When the earthquake hit Bhuj, people in Chennai felt assured that they do not live in an earthquake prone zone. Little did they know that years later, they will be affected by Tsunami. Hence, you never know what can strike you at which point of time. It is better to protect yourself from before than crying over spilled milk.