As individuals, we all have certain financial needs. Ranging from providing our dependents with a financial cushion in our absence to creating wealth to protecting our assets to ensuring a source of income in the old age, the list of needs is endless.
Among the several available financial instruments, insurance stands out because of its ability to take care of a range of needs with its diverse offerings. Read on to know how insurance can help you fulfil all your needs with ease.
Fiscal prudence calls for ensuring financial safety of your dependents in your absence. In fact, the core theme behind insurance is protection. A term life insurance policy helps you fulfil this need. The simplest form of insurance, a term life plan offers a substantial cover at a nominal premium.
Depending on your age, lifestyle habits and the amount of coverage required, the premium can go upwards of a few thousands of rupees annually. In case of any untoward incident during the policy term, the sum assured is paid to the beneficiary.
The proceeds received from a term plan can help your family stay financially independent, meet regular expenses, repay loans and address essential goals such as children’s education and their marriage, among others.
While pure term life insurance plans offer only death benefit, of late, there are term policies which return all the premiums paid, in case the policyholder survives the policy term. They are known as term plans with return of premium (TROP). However, the premiums for such policies are on a higher side.
To build a corpus for crucial life goals, it’s important to invest and put your money to work. Unit-linked insurance plans or ULIPs help you do just that. ULIPs are life insurance plans that offer the dual advantage of insurance and investment in a single product.
While a portion of the premium is allocated towards providing life cover, the other portion is invested in underlying funds of varying degrees of risk to earn returns. The funds can be equity, debt or hybrid. You can choose the funds depending on your risk tolerance.
If you are an aggressive investor, you can opt for equity funds to earn inflation-adjusted returns in the long term. On the other hand, even if the slightest market fluctuation makes you jittery, you can opt for debt funds.
Staying invested in ULIPs for the long term can help you accumulate the desired wealth for various life goals such as children’s higher education, their marriage and even your retirement.
A medical contingency can crop up anytime and therefore, it’s important to remain guarded against it. A health insurance plan fortifies your finances from taking a hit in the event of a medical crisis. By reimbursing the costs incurred during hospitalisation, a health plan prevents depletion of your savings.
While a regular health plan reimburses only hospitalisation expenses, a fixed benefit plan such as a critical illness insurance policy provides a lump sum upon diagnosis of any critical ailment mentioned in the policy. Treatment of critical ailments are pretty high and can run in several lakhs of rupees. This can strain your finances and wipe out a chunk of your savings in no time.
However, the case is much different with a critical illness plan in your portfolio. Not only it provides the amount required for treatment but also ensures the family’s regular needs are well taken care of.
Since a critical illness can put a break on active income and impair a person’s ability to earn, many critical illness plans offer a certain percentage of the sum insured as a monthly pay-out for a certain number of years. This ensures the family can meet its day-to-day expenses.
Vehicle (two-wheeler or four-wheeler) and home are two prized assets of a common man. Damage to either can be a cause of emotional and financial distress. Insurance helps lower the latter by providing a financial cushion in the event of any mishap to both of these.
A motor insurance plan provides a financial backup in case your vehicle suffers any damages, manmade or natural. It reimburses the costs incurred in getting a damaged vehicle back into shape. Additionally, a third-party motor insurance cover provides a holistic coverage in case of any litigations arising due to damages suffered by a third-party involving your vehicle.
On the other hand, a home insurance plan covers you financially in case your home and its belongings suffer any damages due to natural or man-made disasters such as flood, earthquake and theft, among others.
Social security has always been an area of major concern in India, considering the fact that the age of pre-defined pension benefit is a thing of the past. Annuity plans from insurance companies provide a source of income when you hang up your boots.
There are two distinct phases in an annuity plan. The first phase, known as the accumulation phase, is one where you invest either in a lump sum or make a series of payments. The second phase in the one where pay-out is made. The pay-outs made help you meet your post-retirement expenses.
As evident, insurance is a flexible financial tool that aids you in taking care of all your needs in a hassle-free manner. You must review your investment portfolio regularly and add insurance products as an when needed on your path to financial independence.
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