Meeting Long-Term Goals Through Life Insurance
Written on Thursday, March 24, 2016
By Sanjeev Puri
Life insurance not only helps to provide a protection cover to family members it also helps in meeting long-term financial goals
Life insurance is not something people discuss often. Certainly not in get-together and family meets. It’s rather strange, but the truth is that most of the people want to brush it under the carpet even after realizing its importance. Life insurance is a product one must think about and take action on, however, unpleasant it may be.
Why we need insurance?
Those, who have enough assets to see their families through, do not really need life insurance. However, here’s a word of caution: make sure your liabilities do not neutralize your assets. For most others, however, life cover is a must. Sure, we have our provident fund, mutual funds, stocks, fixed deposits and other investments. On the other side of the ledger, we may have our housing and car loans. We will retire safely, if everything goes as per schedule. But what happens if things do not go as per plan? Can we envisage a future where our family has to vacate our home because we are no more? Or, the older child has to drop out of college to find a job and support the younger ones? Shuddering notions, if you know that your net assets are not sustainable for them to continue living as before. So, why not pay a small premium and get a life cover. At least, it assures sound sleep.
The reason to get insured
Life insurance products help in channelizing your savings systematically into various assets for generating returns over the long term. As wealth gets created over long-term, such disciplined savings goes a long way in meeting the long-term financial goals. Also, for the sake of diversification one may use other financial products to create a corpus over long-term. Life insurance products offer a bouquet of products to suit the needs of savings and protection in the path towards wealth creation.
By paying the contracted premium as per the schedule, the insured ensures that a sum gets paid to family on death. Whether one survives or not, premiums paid representing the saving of the insured person helps to accumulate wealth over time.
Another use of Life insurance can be to provide liquidity to heirs of your estate. Life insurance policies with correctly designated beneficiaries, backed by a will, can make the distribution of your estate much smoother.
Why review is important
Once you do get a life cover, you should review your situation periodically to ensure that you are adequately covered. For example, you should enhance the cover once you get married and enhance it even further when you have children. The reverse process begins once you grow older and your kids get settled.
Regular savings through Life insurance not just inculcate a regular savings habit but also help amass a tax-free corpus along the way. The long-term nature of the product instills discipline that helps in meeting long-term needs. The element of insurance, ensures none of the long-term financial goals are derailed on the way.