Insurance planning is a part of financial planning. It helps you grow and protect wealth. Insurance planning is an essential part of the wealth transfer process. It is very important if you are newly married and early in career. If a person dies young he most probably won’t have sufficient assets to transfer to nominees. Life Insurance helps him/her transfer wealth to nominees at a young age. Insurance protects assets like a home, two-wheeler or a car. Insurance planning makes sure you don’t lose money to costly hospitalization or home repairs.
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Term life insurance plans: This is pure risk cover with no survival benefit. It helps transfer wealth to nominees on an unexpected demise. You pay a premium for a sum assured. On an unexpected demise within the term of the plan, death benefits are paid to the nominee.
Endowment life insurance plans: An endowment plan offers the twin benefits of insurance and savings. It helps save over a period of time and on surviving the tenure of the plan, you get sum assured + bonus. On death within tenure, sum assured + accrued bonus is paid to nominees.
Money back plans: It’s a type of endowment plan. You get a percentage of sum assured at regular intervals instead of a lump sum at maturity. Regular intervals can be tailored to meet important milestones.
Ulips: Unit Linked Insurance Plans also called Ulips offers the twin-benefits of insurance and investment. Part of the premiums is assigned for mortality cover and the rest is invested in equity, debt or a combination of both depending on the type of Ulip.
Term life insurance, endowment and money back plans, whole life insurance and Ulips enjoy Section 80C benefits up to Rs 1.5 Lakhs a year.
Whole life insurance: It provides cover across the life of the insured or up to 100 years. The sum assured is decided at the time of availing the policy and is paid on death of the policy holder along with bonuses.
Child plans: These are essentially child endowment or child Ulip plans. They help collect money for children’s education and marriage. These plans give an annual payout or a one-time lump sum after the age of 18 years. Avail child plans with waiver of premium rider so that child gets money for education/marriage even if parents are not around. These are twin payout plans.
Retirement plans: Insurers sell annuity plans. An annuity plan protects from the risk of outliving income. An annuity makes a fixed stream of payments helping retirees get money in retirement. If you want payments immediately opt for immediate annuity plans. If you want pension payments after a specified time, opt for deferred annuity plans.
Health insurance: Health Insurance compensates for medical and surgical expenses on paying a premium to an insurer. You can also avail a family floater health insurance plan, where the entire family is covered for hospitalization expenses. The rising cost of hospitalization and medical treatment make health insurance plans very important in India.
Car insurance: A third-party liability plan protects you from claims by a third-party, against damages to property or physical injury. A comprehensive car insurance plan offers third-party liability and own damage cover for a slightly higher premium.
Home insurance: The structure of your home is protected from damage. You are compensated for repairs of home due to natural calamities or other reasons. You can also avail cover for contents of the house.
Business insurance: The location of business is protected with a business insurance plan. You also stand protected against interruption of business. You are protected against fire and allied perils, business interruption, burglary/theft, public liability, professional indemnity, negligence on the part of the business, product liability, keyman’s insurance and workers compensation. You need to make sure that your business is sufficiently insured to cover all losses suffered.
Each insurance plan serves a different need. Life insurance is for wealth transfer at a young age. Health insurance is for hospitalization expenses of self and family and car insurance protects your vehicle.
Choose the insurance plan which best suits needs and make sure you are covered for all eventualities. Life insurance, health, car and home insurance are crucial to protect life and costly assets.
Make sure to avail a retirement plan like annuity to get income in retirement. Child plans ensure that children have money for education and marriage even if you are not around. Avail insurance for risk protection and not for the tax saving benefit.
IndianMoney.com advises you to review insurance with change in financial goals and life situations.
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