Financial Goals And Life Insurance – How To Make The Most Of It?

There are many different ways to fund future financial goals. These could be low-risk, low-return instruments like bank deposits and small savings or higher-risk, potentially higher-return products like stocks and high-yield bonds. However, many people overlook one of the most important ways to secure your future, and that is buying a life insurance plan. A life insurance calculator can give you an idea of how life coverage is amazing for your future. Additionally, it can help you choose the right plan depending on your life goal. It calculates the ideal premium and policy based on your needs.

Plan for the future by getting life insurance

  • Future goals

Once a goal has been set, and its value has been nailed down, a life insurance policy is a great way to pay for it. This is because the policyholder can be sure that the sum assured will pay for their designed future plans even if something unprecedented happens, like a critical illness or the passing of the policyholder.

  • Tax benefits

Tax-wise, Section 10 (10D) of the Income Tax Act 1961 says that life insurance policies’ maturity benefits are not taxed. Section 80C of the Income Tax Act, 1961, says that the premium paid can be claimed as a tax deduction. However, tax benefits can vary depending on whether the policyholder has opted for the old or the new tax regime.

  • Flexibility

Life insurance offers a large number of options. For example, insurance products like Unit-Linked Insurance Plans (ULIP) allow you to divide your assets to match your risk tolerance, policy length, premium payment terms, and fund-switching needs.

  • Wider options

In life insurance options with an investment component, a wide range of asset allocations between equity and debt can be made. This depends on the time it may take to reach the goal, how much return is needed, and how willing the investor is to take risks. An investor can request for modifications in the policy to meet his needs.

  • Liquidity

After the “lock-in” period of 5 years ends for a ULIP, it offers considerable liquidity in case you need money in an emergency.

  • Earmarking

A lot of the time, people buy life covers or insurance to reach a certain goal. This makes it less likely that the money may be used for something else and encourages people to keep giving.

Life insurance to protect your money:

Life Insurance is a cost-effective way to plan ahead for things like being hospitalised, having a severe illness, paying off debt, etc.

  • Term insurance

Term insurance is the simplest type of life insurance. It pays out the amount promised when the insured person passes away. This can help a family survive if the breadwinner passes away in an unfortunate manner. When the policy ends or a claim is made on it, the money is given to the beneficiaries of the policy.

  • Accident benefit

This is usually an add-on to a basic policy. The beneficiary gets extra money if the policyholder passes away in an accident.

Retirement Planning:

Indians can expect to live much longer now that they have access to more advanced medical facilities. The time we spend in retirement could be as long as the time we spend working. This means we need to save a lot of money while working to keep living the way we want to for a long time after we stop working. Pension plans help us save money while working and give us pay-outs when we retire

  • Provide Post Retirement Income:

The worst thing that can happen to a retiree is to run out of money late in life. In this situation, he might have to ask friends or family for help or sell his fixed assets. In this case, an annuity from insurance may be a wise decision. Annuities bought with money from the retirement fund can be used to provide steady income after retirement for a set amount of time or for the rest of your life.

  • Insurance as a hedge against inflation

Inflation makes money worth less and has a big effect over time. Our actual income goes down every year because our costs of living keep going up. So, it needs to be considered when setting financial goals.

Unit-Linked Insurance Plans and other types of insurance help us protect our financial goals from the effects of inflation by giving us the option to invest in stocks, which are known to provide long-term returns of all asset classes. If we didn’t take inflation into account, our savings wouldn’t be enough to reach our future goals, especially over the long term.

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