A wide variety of vehicles is available for funding of future financial goals. These can be low risk-low return tools such as small savings and bank deposits, or higher risk products like equity that can provide potentially greater returns. Insurance has a higher score than that of other investments in several aspects.
Life Insurance Plans for the Planning of Future Goals
Once you identify your goal and a value for it has been developed, an insurance plan is an excellent way to fund your set goal. This is due to you can be assured that can even in the case of the unfortunate demise or critical illness; the sum assured can fund your future goal.
Many insurance plans come with maturity benefits that are tax-free u/s 10 (10D) and the paid premium is eligible for tax deduction section 80C of the IT Act, 1961.
Insurance items, especially ULIPs (Unit Linked Insurance Plans), cater to flexibility in terms of allocation of assets to match particular risk appetites, premium payment terms, fund switching options, and policy duration’s.
Based on the goal’s time horizon, the return needed and the risk appetite of the investor, a broad spectrum of allocations of assets between debt and equity is possible in a ULIP plan. An investor can tailor his plan as per his requirements.
Many insurance products, after the lock-in period, provide good liquidity to take care of any requirement for funds in case of emergency. But they have inherent deterrents in form of charges to dishearten needless encasement.
Insurance for Fiscal Security:
Insurance assists you to cater to contingent liabilities such as debt redemption, critical illness and hospitalization, etc in a cost-effective manner.
Term insurance is the easiest form of life cover that pays out the assured sum on the demise of the policyholder. This is of use to simply cater to the survival of a family in the unfortunate event of the death of the bread earner. Covering of repayment of any debt of the insured can also be made using this. You just have to assign the policy to your creditor. Once the policy gets mature, the creditor receives the proceeds.
These policies offer cover against critical health care expenses such as critical illness, surgery and hospitalization etc. the benefits can be in the form of a lump sum on the diagnosis of any critical illness or fixed expenses on hospitalization.
This is generally an add-on cover to a basic insurance plan and pays an extra assured sum to the recipient in the case of demise because of an accident. Since death due to the accident is sudden and unfortunate; the family can face issues like debt servicing, another requirement for funds and relocation etc.
Buying a life insurance cover helps in building a corpus during your active life to keep up your lifestyle for a longer period even after retirement. Pension plans also assist you in building a good corpus while years of earning and offer a lump sum on retirement.
Offers Post-Retirement Income:
Life insurance covers offer the best solution in form of annuity. These annuities purchased from the corpus of retirement can either be used to offer regular income after retirement for the entire life or a fixed term.
Insurance acts as a shield for inflation:
Inflation diminishes the purchasing power of money and creates a dramatic snowballing influence over the longer period. It lessens the real income year after year as the cost of living keeps on increasing.