Life insurance is the most comprehensive financial tool to safeguard your family’s future during and after your lifetime
The global pandemic has been a wake-up call for most people in India. The uncertainty it created on many fronts, including health and employment, has forced people to rethink their long-term goals and find ways to safeguard their loved ones. Not surprisingly, they are looking at life insurance from a new perspective.
Life insurance, by far, is still the best and the safest investment product that secures your financial future, helps you to grow your wealth, and offers tax benefits on annual premiums. Life insurance products like Unit-Linked Insurance Plans (ULIPs) offer not only life cover (unique to the category) but also offers reasonable, tax-efficient returns compared to most traditional investment instruments.
If you are the breadwinner, you can invest your hard-earned money in a systematic and disciplined manner. The lock-in period of more than five years in the case of ULIPs allows you to reap maximum benefits from these market-linked products.
It helps you achieve fixed long-term objectives such as children’s education and marriage, buying your dream home, and building a sizeable corpus for your retirement. In the event of the breadwinner’s untimely demise, the sum assured or death benefit is paid as a lump sum to the beneficiaries to overcome financial hardships. Additionally, these policies also offer partial withdrawals, money backs during the survival period, and even loans to be utilised as emergency funds.
Some life insurance plans provide dual benefits. For example, you can buy a life cover linked to your child’s education, which allows you to build a corpus fund that pays for your child’s higher studies. However, you must take the projected inflation into account while deciding on the sum assured. This is important because what may cost a lakh today may cost much more 15 years from now. You should also take into account the policy tenure and opt for a policy with a long-term maturity. If the policyholder dies during the term, the insurer pays the full death benefit and all future premiums. Hence, it helps you pay for your child’s education as well as guarantees financial security both during and after your lifetime.
Retirement planning is another important component of life insurance. Even as your priorities change as you grow older, the idea behind planning for your retirement years remains. Through annuity plans, you periodically save money to secure your finances in your sunset years. These annuity plans help you cope with financial uncertainty after retirement and provide a guaranteed income for life. These plans usually require a one-time investment. You can opt for the payout option as well as select the year when you would like the payout to commence. You then receive the stipulated amount for life. What’s more, you can also nominate someone to receive the sum invested in case of your untimely demise.
In short, life insurance allows you to lay the foundations of your financial planning in a way that safeguards your family’s future, both during and after your lifetime. However, to reap the full benefits, it is always wise to buy insurance instruments early in your life, which will give you a high life cover at nominal premium rates. This will help you plan your various life and financial goals.
The author is Director of Strategy at Exide Life Insurance