Here’s how to show off your financial IQ without being a genius: ask your friends if they have a life insurance policy. The answer in 9 out of 10 cases will be a resounding yes. Ask what kind of policy they have. In 9 out of 10 cases the answer will be a blank or lost expression.
But before you set out on this impression-making trip, make sure to check what life insurance you have. If you know that, you are among the rarest of the rare financially literate people. This isn’t a random hypothesis; it’s a judgment based on a unique peek we have into the household finances of hundreds of Indians across income, age, professional and geographical spread — all thanks to the popularity of our regular feature called Portfolio Doctor.
Since most people don’t know what insurance they have, they don’t know why they have it and if it is adequate. Of the 26 families whose finances we have diagnosed in MONEY TODAY so far (and about 10 times the number of portfolios we have scrutinised over e-mail and the Net) just one family had the right kind of policy, and that too with inadequate insurance cover.
Here’s the irony: life insurance is the most popular financial product (after bank deposits). Yet most Indians don’t know what insurance they have. And almost all of them have wrong or inadequate insurance. The single most important reason for this is that most of us save and invest without clear financial objectives. Those who do have objectives, don’t have investments to fulfill those objectives.
It’s like heading for a destination without a route map — or a wrong map. To drive home this fundamental lacunae forcefully and repeatedly, we have restructured our Portfolio Doctor section from this issue. As for life insurance, we offer you a special issue that should answer all your questions, plus a bonus — a primer complete with definitions, calculations and glossary.
In putting together this ambitious cover story, we ran out of space (even after adding more pages for a thicker issue) for a few regular features — book review, career, Web Index and a section of data pages. We hope the extra we offer in this issue more than makes up for the holdover.
And if you still expect more from us, look out for our next issue. It will be MONEY TODAY’s first anniversary issue — a unique guide for you, not just as an investor but also as a financial consumer.