Financial planning is an investment strategy that helps build wealth to accomplish various goals and meet any emergency. 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 as per your requirements during different stages of life. Your investment portfolio should comprise the right combination of various products that offer protection, wealth accumulation, and savings. Generally, you may focus on accumulating a large corpus and overlook the importance of protection while building your portfolio.
One of the best ways to ensure your family’s financial security in your sudden absence is to buy a life insurance policy. The inclusion of life insurance in your investment portfolio can prove useful in:
Protecting your family
Life insurance is an agreement between you (policyholder) and the insurer, wherein the company provides life cover in exchange for the premium paid. In case an unfortunate event results in your absence during the policy term, your nominees receive the benefits. This ensures your family does not have to face any financial distress in your untimely absence and can sustain their regular expenses and meet long-term goals.
Investing and savings
You can choose from various types of life insurance plans based on your requirements and economic situation. When you pay the premium regularly, it inculcates savings discipline. Several plans provide loyalty benefits, bonus, and guaranteed additions, which allows you to grow your wealth in the end. 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.
If you have taken a home loan or car loan, you can select a life insurance policy that matches 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.
Meeting long-term aspirations
It would help if you planned your finances early in a proper manner to fulfill various objectives like buying a home, paying for children’s higher education, sponsoring their wedding, 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 life goals. With the right insurance product, you can meet these objectives without any financial difficulties.
The premium paid for the life insurance policy is eligible for a tax deduction up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961. Additionally, the maturity benefits or the 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 a large number of 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, thereby 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 will have to pay to procure your desired SA.