Why Insurance is a Must-Have in Your Financial Portfolio
By Chittaranjan Vhora, Founder - VhoraFundz
Last month, a successful entrepreneur visited me with an impressive ₹2 crore investment portfolio. He proudly showed his mutual fund statements, stock holdings, and real estate papers. When I asked about his life insurance, he casually mentioned a ₹25 lakh endowment policy. For someone earning ₹30 lakhs annually with two young children, this was a disaster waiting to happen.
I asked him a simple question: "If something happens to you tomorrow, how long will ₹25 lakhs last your family?" His face went pale. That moment of realisation led to proper insurance planning – the foundation I insist on before any investment discussion.
Insurance: The Foundation, Not the Roof
In my engineering days, we never started building from the roof. Yet, most people build their financial house exactly that way – chasing returns while ignoring protection. At VhoraFundz, insurance is our first recommendation, not an afterthought.
Why Insurance Comes First:
Investments multiply money; Insurance protects it
Returns are probable; Risks are certain
You can delay wealth creation; You cannot delay protection
Small premium, massive protection
Think of it this way: Would you drive your car without insurance just because you're a good driver? Then why live life without adequate protection?
The Three Pillars of Financial Protection
Pillar 1: Term Life Insurance – Your Family's Financial Guardian
What It Is: Pure life insurance – you pay a premium, your family gets a large sum if something happens to you. No investment component, no returns, just protection.
Real Example:
Age: 30 years
Annual income: ₹12 lakhs
Term insurance: ₹2 crores
Annual premium: ₹18,000 (₹1,500/month)
That's less than your monthly phone bill for 20 times income protection!
How Much Cover Do You Need?
The VhoraFundz Formula:
Minimum Cover = 10 × Annual Income + Outstanding Loans + Future Goals
Example:
Annual Income: ₹15 lakhs
Home Loan Outstanding: ₹50 lakhs
Children's Education Fund Needed: ₹80 lakhs
Minimum Cover: (15 × 10) + 50 + 80 = ₹2.8 crores
Recommended: ₹3 crores (round up)
Who Needs It?
✅ Anyone with dependents
✅ Anyone with loans
✅ Primary breadwinners
✅ Young parents
✅ Business owners
❌ Singles with no dependents (can start with smaller coverage)
❌ Retirees with grown, independent children
Common Mistakes to Avoid:
"Investment + Insurance" policies: Pay 10x more for 10x less cover
Employer insurance dependency: Job goes, insurance goes
Delaying because "I'm healthy": Premiums increase with age
Inadequate coverage: ₹50 lakhs feels big but isn't
Pillar 2: Health Insurance – Your Medical Emergency Shield
The Sobering Reality:
Average ICU cost: ₹50,000-1,00,000 per day
Cancer treatment: ₹15-25 lakhs
Heart surgery: ₹3-5 lakhs
Medical inflation: 15% annually
One medical emergency can wipe out years of savings. I've seen clients break their children's education funds for medical treatments. That's why health insurance is non-negotiable.
The Right Health Insurance Structure:
Base Cover (Must Have):
Individual: ₹5-10 lakhs minimum
Family Floater: ₹10-15 lakhs minimum
Coverage: Hospitalisation, pre/post care, ambulance
Super Top-Up (Highly Recommended):
Additional ₹20-50 lakhs
Kicks in after deductible (usually base cover amount)
Costs fraction of base premium
Example: ₹50 lakh super top-up costs just ₹8,000 annually
Ideal Coverage by Life Stage:
Real Cost Example (Age 35, Family of 4):
Base cover ₹15 lakhs: ₹20,000/year
Super top-up ₹35 lakhs: ₹8,000/year
Total coverage ₹50 lakhs: ₹28,000/year
That's ₹2,333/month for ₹50 lakh protection!
Pro Tips:
No Claim Bonus: Increases cover without extra premium
Network Hospitals: Check before buying
Sub-limits: Watch for room rent, disease-specific caps
Waiting Periods: Pre-existing diseases, maternity
Family History: Declare honestly, avoid claim rejection
Pillar 3: Critical Illness Cover – The Income Protector
Why It's Different: Health insurance pays hospital bills. Critical illness insurance pays YOU a lump sum on diagnosis. Use it for anything – treatment, lifestyle changes, income replacement.
What It Covers:
Cancer (specified stages)
Heart attack
Kidney failure
Stroke
Major organ transplants
Paralysis
30+ conditions typically
The Financial Impact of Critical Illness:
Beyond medical costs:
Income loss during treatment: 6-24 months
Lifestyle modifications: ₹50,000-1,00,000
Alternative treatments: ₹5-10 lakhs
Caregiver costs: ₹20,000-30,000/month
Rehabilitation: ₹2-5 lakhs
Recommended Coverage:
Minimum: 1x annual income
Ideal: 2-3x annual income
Can be standalone or a rider with a term plan
Cost Example:
Age 35, ₹50 lakh critical illness cover
Annual premium: ₹12,000-15,000
Benefit: Lump sum on diagnosis, no bills needed
Life Stage Insurance Planning
Stage 1: The Young Professional (22-30 years)
Rakesh, 25, Software Engineer, ₹8 LPA
Mistakes He Was Making:
No insurance ("I'm too young")
Depending on the company coverage
Thinking ₹3 lakh savings were enough
The Right Plan:
Term Insurance: ₹1 crore @ ₹8,000/year
Health Insurance: ₹10 lakhs @ ₹8,000/year
Critical Illness: ₹25 lakhs @ ₹5,000/year
Total: ₹21,000/year (₹1,750/month)
Result: Complete protection at less than a monthly restaurant bill!
Stage 2: The Newly Married Couple (28-35 years)
Amit & Priya, Combined Income ₹20 LPA
Their Concerns:
Planning for kids
Home loan of ₹80 lakhs
Parents getting older
The Right Plan:
Term: ₹3 crores (Amit ₹2cr, Priya ₹1cr) @ ₹35,000/year
Health: ₹15 lakh floater + ₹35 lakh top-up @ ₹30,000/year
Parents' health cover @ ₹50,000/year
Total: ₹1,15,000/year (₹9,583/month)
Result: Less than 5% of income for complete family protection!
Stage 3: Parents with Young Children (35-45 years)
Suresh & Kavita, 2 Kids, Combined Income ₹30 LPA
Their Priorities:
Children's future secured
Lifestyle maintenance
Existing loans covered
The Right Plan:
Term: ₹5 crores combined @ ₹60,000/year
Health: ₹25 lakh family + ₹50 lakh top-up @ ₹45,000/year
Critical Illness: ₹50 lakhs each @ ₹30,000/year
Child plans till 25 years @ ₹20,000/year
Total: ₹1,55,000/year (₹12,916/month)
Result: Children's education is secured even in the worst case!
Stage 4: Pre-Retirement (45-55 years)
Rajesh, 50, Business Owner, ₹50 LPA
His Challenges:
Higher premiums due to age
Pre-existing conditions
Business loan obligations
The Right Plan:
Term: ₹3 crores (reducing as loans clear) @ ₹1,20,000/year
Health: ₹50 lakhs + Critical illness @ ₹80,000/year
Keyman insurance for business @ ₹1,00,000/year
Total: ₹3,00,000/year
Result: Business and family both protected!
Stage 5: Senior Citizens (60+ years)
Mr. & Mrs. Sharma, Retired
Their Needs:
Medical coverage primary concern
No term insurance needed (no dependents)
Fixed income management
The Right Plan:
Senior citizen health plan: ₹25 lakhs @ ₹60,000/year
Top-up cover: ₹25 lakhs @ ₹15,000/year
Critical illness: If available @ ₹40,000/year
Total: ₹1,15,000/year
Result: Medical emergencies won't erode retirement corpus!
The Real Cost of Not Having Insurance
Let me share three real stories (names changed) that shaped my insurance-first philosophy:
Story 1: The Overconfident Investor Rohit, 38, had ₹50 lakh in mutual funds but only ₹10 lakh in life cover. Heart attack at 40. The family had to sell the house, break all investments. Children moved from private to government school. His ₹2,000 monthly "savings" by avoiding insurance costs cost his family their lifestyle.
Story 2: The Medical Emergency Priya's father, 58, needed urgent heart surgery. No health insurance. Bill: ₹12 lakhs. She broke her fixed deposits (penalty), sold gold (poor price), and withdrew EPF (tax impact). Total loss including opportunity cost: ₹18 lakhs. Annual premium would have been: ₹30,000.
Story 3: The Success Story Anand, my client since 2010, insisted on ₹5 crore term + ₹50 lakh health cover despite family calling it "waste." Diagnosed with cancer in 2020. Treatment cost: ₹25 lakhs (covered). Critical illness payout: ₹50 lakhs. Continued family lifestyle, children's education unaffected. Premium paid over 10 years: ₹8 lakhs. Benefit received: ₹75 lakhs.
Common Insurance Myths Debunked
Myth 1: "Insurance is expensive"
Reality: Your daily coffee costs more than your daily insurance premium
Term insurance: ₹50-100/day for ₹1 crore cover
Health insurance: ₹30-50/day for ₹10 lakh cover
Myth 2: "I'm young and healthy"
Reality: That's exactly when to buy
Lowest premiums
No medical tests (not always applicable)
Pre-existing conditions develop with age
Myth 3: "Company insurance is enough"
Reality: It's supplementary, not primary
Job loss = coverage loss
Usually inadequate (₹3-5 lakhs)
No coverage for family in term insurance
Myth 4: "Insurance money is wasted if unused"
Reality: Do you regret not using fire extinguisher?
Insurance is risk transfer, not investment
Peace of mind has value
One claim justifies lifetime premiums
Myth 5: "Online insurance is risky"
Reality: Same insurers, lower cost
20-30% cheaper (no agent commission)
Direct claim settlement
Complete transparency
The VhoraFundz Insurance Checklist
Before Buying:
Calculate correct coverage (not random numbers)
Compare 3-4 insurers
Read policy wordings
Check claim settlement ratio (>95% good)
Understand exclusions
While Buying:
Disclose medical history honestly
Don't hide smoking/drinking
Mention family medical history
Opt for regular pay (not single premium)
Update nominations
After Buying:
Pay premiums on time
Review coverage annually
Update after major life events
Keep family informed
Store policies safely (physical + digital)
Integration with Overall Financial Plan
Insurance is the foundation of your financial pyramid:
Wealth Creation
(Equity, Real Estate)
____________________
Goal-Based Investing
(Mutual Funds, Debt, Gold)
__________________________
Financial Protection Layer
(Term + Health + Critical Illness)
________________________________
Emergency Fund (6-12 months expenses)
_______________________________________
Without the protection layer, everything above crumbles in crisis.
Action Steps: Your 30-Day Insurance Makeover
Week 1: Assessment
List all existing insurance
Calculate actual needs
Identify gaps
Week 2: Research
Compare online quotes
Read policy documents
Check insurer ratings
Week 3: Decision
Finalise insurers
Complete medical tests if needed
Gather documents
Week 4: Implementation
Buy policies
Set premium reminders
Inform family
File policies safely
The Bottom Line
In my 20 years of advising families, I've never met anyone who regretted buying insurance. But I've consoled many who regretted not buying it. Insurance isn't about dying – it's about living with the confidence that your family's dreams are protected.
Remember: Insurance is not an expense; it's the cost of financial responsibility. It's not about IF something will happen; it's about being prepared WHEN life throws surprises.
At VhoraFundz, we've seen how proper insurance has saved families from financial ruin. We've also seen the devastation when protection was missing. Don't let your family become a cautionary tale.
Your family's financial security is just a premium away. What are you waiting for?
—
About the Author: Chittaranjan Vhora, founder of VhoraFundz, believes in building financial plans on strong foundations. An engineer from Manipal Institute of Technology and a former industrialist, he has helped over 700 families secure their financial future through proper insurance and investment planning.
Disclaimer: Insurance is a subject matter of solicitation. Please read policy documents carefully. This article is for educational purposes only. Consult qualified advisors for personalized recommendations.
Need help with insurance planning? Contact VhoraFundz for a comprehensive financial protection review.
Tags: best insurance plans India, term insurance benefits India, health insurance tips India, critical illness cover, life insurance guide India, insurance portfolio planning, family protection insurance, insurance mistakes to avoid, insurance by life stage India, financial protection planning