Life insurance can ensure many a things in your life but if you can ensure to take care of just 4 things through life insurance, your life can be very beautiful and enjoyable. Let us discuss one by one what are these 4 things that you need to ensure.
Protect your family financially
This is the first and foremost thing that you need to ensure. If you see penetration of life insurance in India, it is only 3.3% of India’s population as people do not know that protecting the financial future of your family comes at a very low cost. Term Life Insurance plans in India are the most cost effective Plan which one must have. Term plans are pure life protection plans and designed to protect your family against unforeseen circumstances by providing them adequate financial security.
You should take a term plan which is adequate enough for your family to meet their expenses and financial goals in case something untoward happens to you. Ideally your life cover should be around 15 times of your annual income. Therefore, if your annual income is Rs 10 Lakhs, then your life risk cover should minimum be around Rs 1.50 Crores. This is simply because your family can earn 7-8% risk free return from the claim amount of Rs 1.50 Crores received in case of your unfortunate death. However, this is a broad idea and you should increase your life risk cover further equivalent to your other liabilities, if any.
Protect the future of your children
Even though we work hard to ensure that our children get the best of everything in life, what probably we do not know is the future cost of their goals, like higher education and marriage etc. While planning for your child’s future you must account inflation and take adequate life cover just to ensure that your children do not suffer in case of your sudden death. See below the future cost of higher education in India.
|Cost of higher education||Future Value @8% inflation||Future Value @8% inflation||Future Value @8% inflation|
|at present value||(after 10 years)||(after 15 years)||(after 20 years)|
|Rs 15 Lakhs||Rs 32 Lakhs||Rs 48 Lakhs||Rs 70 Lakhs|
|Rs 25 Lakhs||Rs 54 Lakhs||Rs 79 Lakhs||Rs 117 Lakhs|
|Rs 50 Lakhs||Rs 107 Lakhs||Rs 159 Lakhs||Rs 233 Lakhs|
As you can see that the future cost of higher education of a stream could be 2 to 5 times more than the current cost. To ensure the future of your children, you can take a child insurance plan which comes with the unique benefit called ‘Waiver of Premium’. This benefit states that if the parent dies prematurely, the death benefit would be paid to the child or the guardian. Interestingly, the plan doesn’t stop after paying the death benefit and continues in future without paying any premium. On maturity, the benefits are once again paid to the child or the guardian.
Plan your retirement
Retirement is explained as a golden phase in your life when you stop working and stop earning. Therefore, you must save for your retirement years when you are working. You must save for a target corpus which will be adequate enough to get you regular return to meet your monthly and other expenses. You must also account inflation while setting a target corpus for your retirement. For example, if your current household expenses are 4.00 Lakhs per annum, it will increase to approx 13 Lakhs after 20 years.
Wealth creation for you and family
There is a general perception that life insurance can only protect life and one need to look at other investment avenues for wealth creation. This is completely a myth as life insurance ULIP plans offer you market linked returns by combining the very best of investment and insurance into one. Since the investments are market linked, ULIPs give you much better return than traditional insurance plans. You can choose a ULIP plan, like equity, debt or balanced funds based on your risk profile and investment horizon. You can invest in ULIPs even systematically by paying monthly premiums and benefit from rupee cost averaging through market volatility.
As you can see how life insurance can help you ensure 4 very important things in your financial life – Protecting family’s future, ensuring child’s long term goals even in your absence, your own retirement planning and wealth creation. You should buy a right life insurance plan in India for ensuring each one of these 4 important things!