BUILDING EFFECTIVE FINANCIAL SAFEGUARDS… When individual vulnerabilities lay bare in the face of a global crisis

BUILDING EFFECTIVE FINANCIAL SAFEGUARDS…
When Individual Vulnerabilities Lay Bare in the face of a Global Crisis…

2020 forced the world into Retreat & Contemplation…
A black Swan Occurrence and the enormous devastation that followed, proved beyond doubt that there are unforeseen dangers lurking around in the dark… many beyond our control. The sheer magnitude of the pandemic coupled with its ability to dent our physical and financial well-being made it all the more dreaded.

2021 provided a glimmer of hope …
Life, for a moment appeared to be limping back to normalcy… We were beginning to believe that the worst was behind us. Celebrations kicked in… protocols compromised… as if we had already surmounted the Covid Challenge…
…the happiness though, was short lived…
The Second Wave - A Disaster that was Just Waiting To Happen!!!
Close to the end of the first quarter of calendar year 2021, we had been getting enough feelers of the devastation awaiting us; yet most of us chose to look the other way…

Result…the pandemic unleashed itself with an intensity; several folds higher, ravaging the country, leaving behind a huge trail of destruction in terms of lives as well as livelihoods.

In a sense, catastrophes like these, whether Man-Made or Acts of God… have just one thing in common… They prey on the vulnerable…

Time to Reflect - Learn from our mistakes!!!
Things may have cooled down a bit in terms of the daily case loads and casualties around us. However, regardless of whether another wave is on the cards or not... our ability to learn from our failures and our preparedness in dealing with any future eventualities will be put to test hereon. While the administration gears up to play its part, we as individuals can do our bit too by preparing ourselves mentally and financially to deal with this menace. It helps to reflect and learn from our mistakes…
While the Pandemic may have taken a lot away from us, it has given us back some serious Life Lessons;
the most important one being…
We’re not Invincible … We are Vulnerable…
In an age where science dominates, it took a mere pathogen to make us realize that humanity with all its might and vanity, can still be brought to its knees… A lesson in humility…
Our Vulnerabilities make us human. But they needn’t stop us from living…
Our Life & Our Health need comprehensive protection… Let’s fortify them by setting up a robust defence mechanism…

Insurance: Your First Line of Defence … Let it truly become one!!!
This pandemic taught us the true worth of Insurance, a product long sidelined as just a good-to-have protection tool. As the focus now has shifted on the need for comprehensive protection, the importance of buying the right kind of insurance can’t be emphasized enough.

“Beware of those age old insurance papers lying in your safe…for they might just end up giving you a false sense of security…”

I’m referring to all those “revered” traditional insurance products you carry in your insurance kitty, according them the status of the Ultimate Saviour… Now is the time to know them for what they are…

While most families would have in their financial portfolio, some or the other form of insurance, the questions that need to be asked is whether what they have is the most appropriate one for their needs and whether the cover is good enough to protect their financially vulnerable dependants.
In India, we buy insurance for every other reason than for protection… I say this for a reason…

We buy insurance to earn Returns… This explains why hybrid products (Combining Investment & Protection) have always remained in-vogue

We buy insurance to save Taxes… This explains the massive surge in sales of insurance products especially in the last quarter of the financial year.
Protection, which is supposed to be the core of any insurance product, is relegated to a lowly third place in our overall considerations.
Thus buying decisions are driven by a larger focus on Returns and Taxation as against Protection which is seen as an incidental benefit. The only reason for such a misplaced priority is our inability to decipher the structure of these products and their impact on our finances.
Spotting the Wolf in Sheep’s clothing:
In addition to pitching the convenience of a bundled product, many of these hybrid products claim to offer the best of both worlds, i.e. good returns as well as adequate protection, when in reality they fail to provide anything meaningful on either front. Moreover some of these products also come disguised as plans making an emotional appeal to the potential buyers viz. children’s education plans, children’s marriage plans and several others. The promises made by many of these products are nothing more than half truth’s served on a silver platter.
In short, whatever names these plans go by, one thing is certain; they are a serious drain on your financial resources… and there’s just one way to identify them, these products blend insurance with investment… Thus, I say this even at the expense of sounding clichéd:
“Never Mix Insurance with Investment… Insurance is meant to Protect… Let it handle the job it is cut out for… Let it truly become your First Line of Defence …
Say no to Hybrids… Go for Pure Protection Plans…
As for Investments you have better options at your disposal…


Note: While I may have used Life Insurance as an example to drive home the point on un-informed buying, it is important to note that be it life, health, property or any other form of protection you seek, it is in your and your family’s sole interest to know your options better…
While picking the right product from the vast maze of products and services still remains a challenge, asking the right questions will make the task easier for you. We will talk about this in one of our forthcoming posts.

Conclusion:
The fact that many still remain untouched by the fury of this pandemic is sheer providence and not some divine superhuman ability to fend the virus… The stakes here are too high for one to take a chance. The best bet therefore is to observe and learn from the experiences of the “not-so-fortunate”, many of whom succumbed to the virus.
For the victims of this pandemic, the scars are beyond what a lifetime can heal. For the ones unscathed though, as the memories of this mass affliction begin to fade, there is a looming threat of guards being dropped and safety norms ignored, thus making way for yet another wave…
And as I write this article, the talks of an imminent third wave rend the air… Let us hope that this time around it is not a wave… it is just a fizzle… Either way… we do what we ought to be doing first… Build Effective Financial Safeguards… Protect our vulnerabilities against the Vagaries of Life!!! The fact that many still remain untouched by the fury of this pandemic is sheer providence and not some divine superhuman ability to fend the virus… The stakes here are too high for one to take a chance. The best bet therefore is to observe and learn from the experiences of the “not-so-fortunate”, many of whom succumbed to the virus. For the victims of this pandemic, the scars are beyond what a lifetime can heal. For the ones unscathed though, as the memories of this mass affliction begin to fade, there is a looming threat of guards being dropped and safety norms ignored, thus making way for yet another wave… And as I write this article, the talks of an imminent third wave rend the air… Let us hope that this time around it is not a wave… it is just a fizzle…

Either way… we do what we ought to be doing first…

Build Effective Financial Safeguards… Protect our vulnerabilities against the Vagaries of Life!!!

About the author


Deepak Rameshan, CERTIFIED FINANCIAL PLANNERCM, Dip TD, MMS.
Deepak Rameshan is a CFPCM professional, and has been working in the financial services domain for close to 13 years. He holds a Master’s Degree in Management Studies and a Diploma in Training & Development and has been actively engaged in Training & Content Development during this period. As a Personal Finance Enthusiast and an avid researcher of the subject, Deepak has delivered several Investor Awareness Workshops over the years covering areas such as Risk Planning & Insurance, Retirement & Goal planning, Tax Planning and a few other specialized areas. He takes keen interest in writing and has penned numerous articles for this blog, addressing some of the most relevant concerns that individuals face with respect to their finances.
“Financial Planning Standards Board Ltd. (FPSB Ltd.) is the proprietor of the CFPCM, CERTIFIED FINANCIAL PLANNERCM and marks outside the United States, including in India, and permits qualified individuals to use these marks to indicate that they have met FPSB Ltd.’s initial and ongoing certification requirements.”
Watch this space for more insights on Personal Finance…

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