Mix insurance and investment

With the rise in the cost and standard of living, the financial planning has become extremely important. But merely planning for the immediate future is not enough. You need to plan for the distant future too. Some of the most common forms of investments through which you can make provision for your future are mutual funds, stock market, fixed deposits, property, and even the purchase of gold. In addition to these, insurance plays a key role in the financial planning as it doubles up as protection cover and also investment avenue.

Insurance plans make available different options such as traditional plans, ULIPs, etc., which act as a solution for almost every requirement like education, retirement etc. Here is how insurance can help you achieve each of these objectives.

Make saving a priority:

When planning your finances, an important thing to keep in mind is that the earlier you start, the more you will save. One of the major benefits of starting early with an insurance plan is that you will get a larger life insurance cover at a lower premium. Some of the best options to turn to when you are looking to save are endowment plans and money back plans, especially in your start up years as they can help you build your habit of saving. These plans usually come with a secured returns and a reasonable life cover.

Invest where it grows:

When looking for investment with good returns, ULIP is one of the best products in the life insurance industry. The advantage with ULIPs is that it is a flexible investment option. This gives the customer an opportunity to choose the type of fund that you would like to invest in, as per their risk appetite. ULIPs also allow you to navigate your investment against market volatility through options such as premium apportionment and fund switch option.

This product allows the customer to switch funds without any cap. The customer can alter the proportion of debt and equity funds, balancing out the portfolio. The most beneficial feature, however, of ULIPs is that this type of plan comes with the twin benefits of life protection as well as a market-linked growth for the investment.

Invest where it grows:

Insurance can provide you with various options that allow you to protect your money for your family’s future, in case of your death or if you are incapacitated due to some accident. Some of the most prominent options that make this possible are term plans, and riders like Waiver of Premium or Accelerated Critical Illness (ACI). While terms plans offer your family with the complete sum assured upon your death, riders such as waiver of premium protect your family’s finances. This option helps since the nominee would still get the complete sum assured, without the obligation of having to pay a premium for the remaining policy term. The elimination of premium may come into effect in case of death or accidental total permanent disability.

Additionally, Accelerated Critical Illness can provide relief even in a situation such as occurrence of a critical illness. This allows you to advance your life cover so that money is available to you when you need it the most. The benefit of riders is that they provide additional features that can be taken along with your base plan, at a nominal additional cost. Besides riders, term plans too can help protect your finances through the various options that it provides. These options could range from providing security for future situations such as change in responsibilities depending on your life stage, inflation, etc., to taking care of loan liabilities by your family, in case of the unfortunate demise of the bread earner. Now life insurance serves several purposes in addition to simply providing your family with basic monetary relief once you are gone. It is, therefore, a good idea to think about insurance the next time you want to invest your money wisely.

(The writer is an AVP, product development at Bajaj Allianz Life Insurance Company Ltd)