Why Life Insurance Is Important During Financial Planning

Financial planning is an investment strategy that helps build wealth to accomplish various goals and meet emergencies. The rising cost of living due to inflation makes it important to start planning your finances early.

It is advisable to customize your financial plan to meet your requirements during different stages of life. Your investment portfolio should comprise various products that offer protection, wealth accumulation, and savings. Generally, you may focus on accumulating a large corpus and overlook the importance of safety while building your portfolio.

Buying a life insurance policy is one of the best ways to ensure your family’s financial security in your sudden absence. The inclusion of life insurance in your investment portfolio can prove useful in the following ways:

  1. Protecting your family

Life insurance is an agreement between you (the policyholder) and the insurer wherein the company provides life cover in exchange for the premium paid. Your nominees benefit if an unfortunate event results in your absence during the policy term. This ensures your family does not face financial distress in your untimely absence, can sustain their regular expenses, and can meet long-term goals.

  1. Investing and savings

You can choose from various life insurance plans based on your requirements and economic situation. Paying the premium regularly inculcates savings discipline. Several programs provide loyalty benefits, bonuses, and guaranteed additions, allowing you to grow wealth. You can also opt for unit-linked insurance plans (ULIPs), which provide life cover and investment. Here, the insurer uses a portion of the premium for life cover and invests the balance in various instruments like equity or debt funds as per your risk-taking capability.

  1. Managing risks

If you have taken a home or car loan, you can select a life insurance policy matching the loan duration. If an untoward incident occurs during this period, the policy benefits that your nominees will receive can cover the repayment of any outstanding debts, ensuring that the monetary burden does not fall on them.

  1. Meeting long-term aspirations

It would help if you planned your finances properly to fulfill your goals of buying a home, paying for children’s higher education, sponsoring their weddings, and building a substantial fund for your retirement. You can use a life insurance premium calculator to understand how much you need to save regularly to accomplish these goals. With the right insurance product, you can meet these objectives without any financial difficulties.

  1. Saving taxes

The premium paid for the life insurance policy is eligible for a tax deduction of up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961. Additionally, the maturity or death benefits paid under the life insurance policy are tax-free under Section 10(10D) of the Act.

Often, you may delay buying life insurance because you think it is early or because you are confused with many available products. However, investing in it at a young age helps reduce the premium, saving a significant amount over the long term.

You can check life insurance quotes online via a reliable portal. This allows you to compare different policies, features, inclusions and exclusions, and other terms and conditions, helping you make an informed decision.

Another key factor is how much coverage you need. To determine an adequate sum assured, consider your age, current lifestyle, income, and future life goals. You can use an online life insurance premium calculator to estimate the approximate amount you must pay to procure your desired SA.

Investment planning is important for a safe financial future. Including a life insurance policy in your plan is the first step to securing your loved ones.