A combination of term insurance, child plans and whole life Ulips can help you meet your various financial goals
What’s your next goal in life? Buying a new home? College education for your children? Or visiting the places you always wanted to explore? Your goals always make the process of planning easier. And this is the case with your financial plans as well. Setting life goals is the key contributor that drives you to achieve them. What is required is a disciplined approach over a period of time, and before you know it, all your dreams are a reality.
Every investor usually strives for financial protection for the family and investing adequately for future needs. But what we often forget is that each goal requires some financial assistance to achieve them. And once the goals are identified, the role of risk management tools such as life insurance gains importance. With life insurance you are not only protecting your family but also preparing to meet your long-term financial goals.
Let’s look at how life insurance is suitable in helping you achieve these financial goals.
Securing finances for loved ones
Term insurance protection is another step on the road to financial peace of mind. It is the purest form of insurance – it’s cheap and is the best product to create a financial net for the people dependent on you.
Being a bread-winner of the family, you have to ensure the dependents are backed by a strong financial shield. To start, determine your net earnings after taxes as well as your routine living expenses. Then take into account any outstanding debt—such as mortgages, education loans, or other loans—as well as future tuition bills and how much a surviving spouse might need to figure out the size of the retirement nest egg required. Generally, you will want a benefit that will cover all of these expenses.
Once these expenses are taken into mind, you pay a fixed amount of premium to the insurer, and in return you get a life cover against your life in the form of a death benefit. A term insurance pays the entire sum assured to the nominee in case of death of the policyholder to help them tide over any financial crunch.
Child plan to secure their dreams
Wanting the best for your child is very natural. For every parent, the primary concern lies in ensuring that their kids have a secure and better tomorrow. This involves being able to give your child the best possible future and have all the necessary financial support during all the major milestones of their lives—education, lifestyle, marriage and so on. But to achieve this, one should have a clear-cut plan about how to provide for the same. But if we look at the cost of education, it’s increasing every year making it more difficult for parents. This is where a child insurance plan helps in fulfilling your child’s dream, even in your absence.
Child insurance plans are investment-cum-insurance plans offered by insurance companies and are similar to Ulip plans. The only difference is that the parents need to invest in a child plan right from the time the child is born. Often such plans help to secure the child’s future by offering enough money to complete the education in your absence or on maturity, which is mostly when the child is legally mature.
In case the parent passes away during the policy tenure, the policy stays in force. However, in such cases, most plans waive off the further premiums to be paid that is required to keep the policy active.
Retirement is not just a state of mind of an individual but also a financial issue. Most of us will argue that we are too young to plan for retirement. However, when it comes to retirement planning, it is never too early to begin. Retirement planning should be done in such a way that you can easily meet your medical expenses and living expenses. To meet these expenses, life insurance (Whole Life Ulips) is an attractive option available for you, where in your money can be invested in equity and debt investment or safer government securities.
Irrespective of your age, whether you are in your 30s, 40s, or 50s, you must plan your retirement efficiently to stay financially independent. This ensures that you get a huge corpus on your retirement, which can help you to maintain your lifestyle without any complication. The new-age retirement products provide tax-free income upon retirement for lifetime and also have the flexibility to withdraw tax-free fund value any time after five years. The individual who is investing has the choice of multiple investment strategies to maximise growth of fund value.
The writer is chief business officer, Life Insurance, Policybazaar.com