An insurance policy can be helpful in many ways. Not only does it serve the purpose of providing cover against death and accidental injuries, but it also plays a pivotal part in planning your finances in the long term. Frankly, no financial plan is complete without factoring in an insurance policy.
Let’s take a look at why insurance policies are so important and how they help secure your financial future.
Types of Insurance
With the ever increasing cost of living coupled with the uncertainty of life, acquiring insurance cover has become a necessity.
But when it comes to insurance, there’s no one specific policy that would fit everyone’s needs. Insurance policies aren’t a one-size-fits-all deal. There are several types of insurances that can prove to be essential at different stages of one’s life.
These insurance policies are broken down into the following major categories.
- Life insurance policy to provide you cover for death and total permanent disability (TPD) caused by accidents.
- A health insurance policy to provide you with cover for medical and hospital costs, and cover against a plethora of illnesses and diseases.
- A home insurance policy to provide you protection in case your house or the items within gets damaged by man-made or natural causes, burglary, vandalism, etc.
- A car or motor insurance policy to provide you coverage in cases your vehicle gets damaged.
- Savings and retirement insurance policies help you set up a large enough corpus to secure your financial future and account for future expenses.
These policies can further be boosted by opting for additional riders. These riders increase the scope of coverage and further widen the areas of protection.
Riders could include coverage against critical illnesses, specific diseases, accidental death, etc. Based on the amount of premium you can afford and the level of coverage you desire, you can opt for these add-on covers.
How Insurance policies help plan you plan your finances
Protection against death
While there is no way to protect oneself against death, you can at least ensure you leave your family with some form of corpus. Life insurance policies provide your surviving family with funds that can help them cope with various expenses such as debt, education costs and the general cost of living.
Cover against cost of illnesses
Falling ill can run up a huge bill. Especially when diagnosed with terminal diseases or critical illnesses. Having the right insurance policy will help mitigate the expense such that you wouldn’t have to dip into your savings.
In the unfortunate event that you were to be diagnosed with a terminally ill disease, you would definitely require a policy that provides cover for extensive medical care such that your family wouldn’t be left with a huge medical debt to be paid.
Plan for your child’s future
Insurance policies help in preparing for the future which is why it is such an essential aspect of one’s financial plans. Future expenses such as your child’s education can be covered for through education insurance policies. These policies will also provide your child/children with access to the required finances in the event of your untimely demise.
These policies can be endowment type plans or investment-linked plans. Once you take into account how much you’d like to set aside and factor in inflation, these policies will prove fruitful in helping your children pursue their education and enable them to have a brighter future.
Helps plan for retirement
Retirement years are meant to be fulfilling, with time being spent pursuing hobbies, travelling, or just spending more time with family. But retirement can be an expensive affair if not planned properly.
Having merely savings set aside wouldn’t suffice. You need to have a corpus large enough to provide you with 60 to 70% of your last drawn salary. Without steady income coming in, you’d feel the pinch of even the tiniest of expenses.
These insurance policies can be endowment plans or investment-linked plans that offer guaranteed yearly payouts. The policies come with long tenures that allow you to start saving early and offer added coverage of death and TPD benefits.
Enhanced areas of coverage
The insurance policies don’t come alone. They have additional riders with them that you can opt for to add more layers to the coverage provided. These covers can help you get additional benefits and coverage. You can increase the age insured, the amount of funds, add on multiple riders to your existing package. By customising these policies, you can enhance the protection level offered by the policy and tailor the policy to your requirements.
Protection of your assets
There are a number of insurance policies that protect your property like your house and your vehicle. These policies provide protection against physical damages to your residential property and the items within.
While investing is an important aspect of financial planning and allows you to grow your savings, having the right insurance policies in place accounts for protection planning is the foundation for any sound financial plan. Insurance policies allow you to enjoy your standard of living without having to worry about unexpected expenses.
