COVID-19 outbreak: How to ensure financial security during such a crisis?

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Published: March 27, 2020 3:49 PM

Staying invested and continuing payments in a regular and disciplined manner will enable policyholders to overcome the impacts of the current market movements. In the wake of uncertain global high impact events, some of these things offer the necessary security to investors.

life insurance, insurance, coronavirus, corona virus, covid-19, market fall, investments, term plan, annuity plan, ulips, Today, most individuals have liabilities in the form of home loans, vehicle loans, personal loans, etc. Term insurance can enable an individual to secure the family from these liabilities.

We along with the rest of the world are witnessing events of unprecedented nature. Hence, in such times, it is important to stay calm and think wisely about your financial portfolios and how adequately you are covered.

Experts say, there is bound to be uncertainty and a certain amount of insecurity. However, financial protection is a must under any given circumstance. Insurance is a fundamental component of any financial portfolio of a retail investor. Insurance not only helps you financially during unforeseen circumstances, but it also ensures that key life goals are met regardless of market volatility. In the wake of uncertain global high impact events, some of these things offer the necessary security to investors.

Life insurance is a long term product, hence, short term volatility should not be a deterrent when it comes to paying premiums for savings and investment plans. Harshad Patil, EVP and Chief Investment Officer, Tata AIA Life Insurance says “If an investor has purchased life insurance products offering guarantees, then he/she needs not to react to market volatility and just continue to stay the course so that their long term financial goals can be achieved.” All life insurance plans are designed to provide benefits over the long term.

Today, most individuals have liabilities in the form of home loans, vehicle loans, personal loans, etc. Term insurance can enable an individual to secure the family from these liabilities.

For individuals nearing retirement, Annuity plans can help them generate regular income even in their retirement years. Srinivasan Parthasarathy, Sr. EVP, Chief Actuary, and Appointed Actuary, HDFC Life says “One may think that expenses reduce with increasing age. However, in reality, the need for regular income is higher with increasing age as one needs to have funds available for age-related medical expenses. That is where Annuity plans come in. They enable individuals to continue with their lifestyle as well as meet their age-related needs.”

For individuals who do not take risks, traditional plans are a good option as investments are usually made in debt instruments under these plans. Unit Linked Insurance Plans (ULIPs), on the other hand, provide exposure to equity markets where policyholders get potentially higher returns. ULPIs are flexible plans and allow policyholders to choose the funds in which they want to invest.

Parthasarathy of HDFC life says, “In the current scenario, policyholders with ULIPs can benefit as their investments are safe in professional and able hands and not exposed to human emotions and panic selling unlike in other open-ended instruments. It has been historically proven that market volatility gets evened out over the long term.” Therefore staying invested and continuing payments in a regular and disciplined manner will enable policyholders to overcome impacts of the current market movements. Try to stay focused on your long-term goals.

Another area which should not be ignored by policyholders is the need to protect themselves as well as their family financially from critical illnesses. Fixed benefit plans enable policyholders to ensure they can face critical illnesses without having to dip into the family’s savings pool.

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