Insurance Plans to Achieve Your Investment Goals

As you plan for your financial future, it is important to consider protection as well as growth. Insurance products can be a valuable tool in achieving these goals, but it's important to select ones that align with your investment objectives. In this guide, we will understand these objectives along with insurance solutions to sync with the same. By following these guidelines, you can ensure that your insurance choices support your long-term financial aspirations.

Understanding Your Investment Goals

Before you consider which insurance plan to select, it is necessary to realize where you want to invest your money. Ask yourself: Are you opting for long-term savings to grow your wealth exponentially over time? Or are you about to retire, and want to live without having to worry about money any longer? On the other hand, you might have medium-term objectives such as buying a new car or going on a trip.

To determine this, think about the extent of risk that you can deal with (level of comfort with the possibility of losing money) as well as how long you are planning to keep money invested and how much profit you wish to get. Knowing these things will allow you to identify those financial products that will yield the best growth rate for your financial plans. Create an investment portfolio that is best suited to meet all your financial goals.

Let’s discuss different types of insurance products that can suit your needs.

Types of Life Insurance Products

A life insurance policy is an agreement between an insurance policyholder and an insurance company whereby the insurer agrees to pay a certain amount of money in return for an insurance premium, either at the insured person's death or after a predetermined amount of time.

Let’s understand different types of Life Insurance:

Term insurance

Term insurance ensures the financial stability of your family by providing a lump sum amount in case of your death within the policy period. Hence, your family will be able to cover the necessities in terms of household costs, repay debts, and even meet future goals like the higher education of your children in your absence. A term plan is, therefore, a vital part of financial planning for the family’s breadwinner as it is a cost-effective tool to secure future protection for your family. Term insurance can be referred to as a zero-risk product as it does not link its payout to the stock market or any other external factors. Further, compared to other life insurance products, the cost of owning a term insurance plan is lower. If you buy your policy while still young, you may be able to obtain relatively higher coverage for a lower premium amount, since the risks of ailments and fatalities will be lower.

It's important to understand that returns on investment are more complex than simple financial gains or profits. Purchasing term insurance is an investment in your family's safety and stability, particularly if they are depending on you. It's an investment in the peace of mind that comes from knowing that your family will be well taken care of.

ULIPs (Unit Linked Insurance Plans)

Both insurance and investment options are combined in a unit-linked insurance plan (ULIP). ULIPs give you decent life coverage for the policy tenure, while coming with a minimum lock-in period of five years. At the same time, they are designed to help you achieve wealth creation via a diversified portfolio of investments that are linked to the performance of the market. Through a ULIP, you can allocate your money into different funds (equity, debt, balanced funds, etc) as per your preferences, goals, and risk appetite. Bonds or low-risk debt funds are good when you are looking for something safer. On the positive side, equities and hybrid funds will likely be more profitable with longer tenures, if you are ready to bear higher risks.

Additionally, ULIPs offer flexibility regarding fund switches and partial withdrawals. They provide interesting perks to help you accumulate more money over time, such as wealth boosters and loyalty additions. Furthermore, according to Section 10(10D) of the Income Tax Act of 1961, the maturity amount from ULIPs is tax-free in case the annual premium does not exceed Rs. 2.5 lakh.

Endowment Insurance Plan

Endowment plans are the most attractive alternative for those who are looking for both life insurance and fixed returns. An endowment insurance policy comprises of life coverage and regular investment opportunities. This entails that you get the entire amount once the policy matures. If you die within the policy term, a death benefit will also be paid to your chosen nominee(s).

You can decide on the payout options and the mode of the premium in most cases. If you purchase a participating endowment plan, you will also be eligible for bonuses, which are additional amounts the insurer gives you in addition to the sum guaranteed by your policy.

Retirement Plans

Investing in your future comfort or planning for retirement is hugely important. While it's called retirement planning or creating a nest egg, the purpose is basically setting aside money from today's income to be used for meeting your living costs after you stop working and earning a regular income. This, however, can be achieved through saving consistently and taking wise decisions on investments. You can check out several retirement plans with life insurance components that pay out regular income in the form of a pension after retirement. There are also ULIPs and other investment options to help you save enough for the golden years of your life.

Conclusion

It is important that you choose your insurance plan according to your investment goals. Know your risk tolerance, holding period, and desired outcome of investing. Whether it's life insurance like term plans or ULIPs, or health insurance for medical expenses, choose carefully based on your current and future priorities. A well-balanced portfolio should always have sizable life and health coverage in addition to investment plans for retirement and future goals like the higher education of your children. Consider insurance plans accordingly.

 

Aastha Mestry - Portfolio Manager 

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.