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How much life insurance do you really need

Are wealth-with-protection solutions of life insurers good options

We all have dreams and want to achieve key milestones of our lives like building our home, funding education of our children, providing the best lifestyle to our families to name a few. In order to achieve these dreams, one should have a financial goal in mind and work towards achieving it.

All of these goals can be achieved over a period of time and, hence, need robust planning. Wealth-with-protection solutions by insurance companies have been designed to ensure that you can save for these long-term goals in a systematic manner to receive the benefit of life cover and provide protection to your family.

Wealth-with-protection solutions offered by life insurance companies play a tripartite role of regular savings, protection and providing tax benefits.

How much insurance do you need

While there may be many ways to protect family against life’s uncertainties of life, none has the charm of insurance products – the surest way to mitigate risk. Not just that. For working individuals, it is the best way to regulate savings. Some of the important things one must consider before investing in any insurance policy is – coverage of that policy, benefits in the long run, term and the premium amount to be paid. Choose a policy depending upon your income, so that you will not face a concern over premiums.

Would it be a good move or a bad move?

We need to first talk about fundamentals of insurance and then mull over the policy decisions.

Young professionals today, are financially independent. They manage their own finances and they also support their families, either partially or totally. In such a scenario, planning of your life insurance needs is absolutely critical so that in case of any unfortunate event like an accident or a sudden demise, the family doesn’t go through a financial trauma and the plans or dreams for the families are not disturbed.

Which product to go for

Most people tend to push this investment for their older age, but one must realise that there are many benefits from buying these policies early on. When you opt for life insurance, you qualify for multiple benefits such as tax deduction, protection and capital gains over a longer period of time. It also instills the habit of saving and builds financial discipline, thus, ensuring peace of mind in the long run.

The plans could be based on either traditional or Ulip (unit-linked insurance policies) platform. Types of wealth-with-protection solutions available in the market are as below –

Whole life plans: These plans enable one to meet financial goals and also gives financial security over an entire lifetime.

Single premium plans: These plans strive to give a guaranteed return on maturity that is tax-free and the financial security of a life cover. Some plans give customers a choice of the single premium amount they want to invest.

Endowment policies: An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its ‘maturity’) or on death. Typical maturities are 10, 15 or 20 years up to a certain age limit. Some policies also pay out in the case of critical illness.

Policies are typically traditional with – profits or unit linked (including those with unitised with-profits funds).

Highest net asset value (NAV) products: As an informed investor, you appreciate the potential of equity markets to generate wealth over the long term. You also understand that market volatility can impact your investments and, hence, you are looking for investment options that enable you to diversify your risk to suit your investment needs. These policies can lock in your gains and safeguard your investments from potential downsides.

What make these policies so convenient are the other joint benefits that come along.

The illustrations in the policies make these easy to understand and provide an overview of how your life insurance policy may perform over the years. Apart from creating wealth in the long run, these solutions also offer key benefits such as death benefit, survival /maturity benefit. Riders or the special benefits can be availed by the policyholders in addition to the life insurance cover by paying a small additional premium. In some life insurance policies, you can also avail a loan against it.

Plan as per your needs

You can avail insurance plans as per your needs and requirements. If you want to save for your child, you can go for children insurance plans providing you with returns at important milestones of your children’s life like their education and wedding. If you want to save for your retirement, you can invest in pension plans either in Ulips or in simple endowment plans depending upon your risk appetite.

Multiple investment options

There are two primary investment options within wealth-with-protection solutions in case of a Ulip – self-managed option and guaranteed option. The self-managed option gives you complete access to invest your premiums in well established suite of investment funds, ranging from 100 per cent debt to 100 per cent equity. Guaranteed option is where your investments are fully managed by your insurance provider. Apart from these conventional options, companies also offer unique choices like trigger portfolio, lifecycle option to best manage your investments.

Begin doing what you want to do now. We are not living in eternity, we have only this moment, sparkling like a star in our hand and melting like a snowflake…wrote philosopher Francis Bacon Sr.

It is said that destiny is not by chance, but by choice. While this may or may not apply to all aspects of life, but, when it comes to financial security of our near and dear ones, it isn’t very far from the truth. One of the many steps to shape our financial destiny is to provide adequately for the future. That’s where insurance comes in. It is time we took steps to paint a fair picture of what one needs to provide for.

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