Forget IQ – Have you ever thought about your Security Quotient (SQ)?
Forget IQ – Have you ever thought about
your Security Quotient (SQ)?
Just as I.Q. (Intelligence
Quotient) is a score that measures your overall intelligence, Security Quotient
(S.Q.) measures how well you have managed the security of different areas of
your financial life. By security I am talking about insurance against external
factors.
You head out of your home everyday and brave the perils of your
daily job to earn money. You strive to ensure you have enough funds to meet
your financial goals and to have a good lifestyle including buying a home, car
and other assets. But you are always exposed to various kinds of external risks
in life. If you do not take measures to handle them, you can come under attack
from them some day and your financial life may be severely crippled or may even
collapse. It is therefore imperative that you protect yourself well from all
sides and have the resilience to deal with any kind of risk. This should take
the form of preemptive action, which ensures that should an adverse situation
arise, you already have put things in place to eliminate or minimize the risk.
Now lets look at few areas, both big and small, and how you can
take actions to protect yourself from risks in these areas.
1.
Protection
against Life Risk (35%)
While
you can control your actions, you have little to no control over the actions of
others and the incidents arising from those actions.
So
have you taken sufficient life insurance through a term plan or are you still deluding yourself by
having those 3 or 4 traditional life insurance policies, which would not even
feed your family for 2-3 years in the unfortunate event of your demise!
2. Protection against Hospitalization Risk (25%)
Many People think that paying premiums for a product that
‘might’ not be needed was a waste of money. Unfortunately, as a result of the
unexpected hospital bills, a good part of the retirement corpus gets eroded.
After
a certain age it would be tough to get a policy at a reasonable premium. The best time for you to take health
insurance is NOW.
How
about you? Are you sitting on a pile of cash to the tune of 5-10 lakhs? You had
better be
ready with this money it if you are not planning to take good health
insurance cover.
3. Protection against illness (5%)
Now what if you catch some major illness? Are you taking care of
your health properly? Are you walking, exercising, biking and eating correctly?
These are some steps you should be taking today to make sure you lower your
risk of illness or disease. Admittedly, this was a non-finance tip, but also
considers taking critical illness cover so that in the event you are diagnosed
with something major, you get support from health insurance companies in form
of money.
4. Protection
against Theft at Home or Fire (5%)
Again, though chances of something like this happening are
minimal, the risk will always be there. It is therefore your choice if you want
to be prudent and get insured against home damage due to theft, fire or other
natural disasters. The good thing is, it does not cost a lot of money. A Few
hundred rupees are all you need to pay for reasonable coverage against these
risks.
5. Protection
against Frauds on Credit Card and Banking (5%)
A frightening thing is that smart people have lots of tricks to
exploit the fragile systems to loot investors. The ideal way to protect
yourself is to know and apply the best practices to secure your information and
also study the rules about banking and credit cards. You also have the option
to take insurance cover against credit card theft and frauds, if that appeals
to you.
6. Protection
against Job loss (10%)
The shock of job loss is high because most people are
immediately concerned about two things – “Will I get another job?” and “How
will I handle my expenses for next few months?”
You can actually handle the second issue by maintaining an
emergency fund that is sufficient to cover your expenses for a predefined
number of months in the event of job loss. Say for example your expenses amount
to Rs. 50,000 per month. You should be setting aside Rs. 3 lakhs only to be
used if you lose your job. You could deposit the money in a F.D. and earn good
interest on it – but it has to carry the mental label of ‘for emergency use only’!
You also need to make sure you enhance your job skills and also build a strong
position in your company. The ideal situation is when your employer needs your
expertise more than you need that specific job! Achieving this outcome is
purely in your control.
7. Protection
against your Car Accident (10%)
What if your car were to be in a major accident and get badly
damaged? What if it were to get stolen? What if you were to hit someone by
accident and have to foot a bill of Rs. 35,000? Who will pay for all these
expenses? (A similar analogy can be applied to 2-wheelers as well)
The way you can protect yourself against these risks is by
taking auto insurance. Thank god it is almost mandatory in India and no one
makes a fuss about getting it (like they do about term insurance).
8. Protection
against loss of key documents (5%)
Make sure, that you are more careful about handling the critical
pieces of paper like passport, driving license, insurance policies, property
documents etc.. While doing your best to ensure you never lose them, always have
a backup somewhere should you misplace the originals. The same goes for the
keys to my home as well as for important emails and digital documents!
So whats your Security Quotient between 0% – 100%?
Source: www.jagoinvestor.com
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