Mr. Smith Case : Risk Cover

Insurance needs should be constantly reviewed and monitored from time to time. If this is not done, then the investor falls prey to the risk of under insurance. This is exactly the case with Mr. Smith. He had taken a 25-year money back plan when he was 30 years for Rs, 2,00,000/-.

In addition to the money back plan, it is recommended that Mr. Smith take a term insurance plan. He can take up a cover for Rs, 30,00,000/- for a 20-year period. This amount of Rs. 30,00,000/- will not only help his family in meeting his outstanding liabilities but also in meeting expenses to some extent. The annual premium comes to Rs. 16,346/-. A suitable term plan that can be recommended is the Priceless Being. A term plan becomes important primarily because of the highly leveraged position of Mr. Smith. In case of his unfortunate death, his liabilities should not become a burden for his wife and child. Secondly, this plan can be used as a suitable supplement to the existing insurance cover. Due to its low premiums, such a plan will not cause any additional financial burden for Mr. Smith. He can also invest the proceeds from the money back plan in mutual funds, the returns from mutual fund can be used to pay the premiums for this plan.