Why insurance is a must-have in any financial plan

November 23, 2020

why-insurance-is-important-in-financial-planning

Insurance is a very important financial product. It offers you a protective financial cover against the various contingencies in life. For the many uncertainties that life throws your way, there are different types of insurance that you can bank on. Primarily, insurance for individuals is categorised as Life Insurance and General Insurance.

Life Insurance offers a cover on the life of the policyholder. General Insurance, on the other hand, comes in many different forms. There’s Motor Insurance for your vehicles, Home Insurance for your house, and even Travel Insurance for your vacations or business travels. And most importantly, there’s Health Insurance, which offers you a bankable cover for medical emergencies.

Life Insurance and Health Insurance, in particular, are very necessary. They’re must-haves in any financial plan. Here’s why.

Why Life Insurance is a must-have in your financial plan

The best Life Insurance plans offer the policyholder’s family adequate coverage in the event of the death of the policyholder. This, and many other reasons, makes Life Insurance a must-have. Let’s delve deeper into these reasons.

Life Insurance offers financial security for the survivors

With Life Insurance, you can secure your family’s future and ensure there’s a source of replacement income for them in the event of your unfortunate demise. With the death benefits derived from Life Insurance, your survivors can meet any significant expenses you may have left behind, like debt repayments. It also helps your family remain on track and achieve their life goals.

It helps with your retirement planning

By purchasing the best Life Insurance plan to meet your long-term goals, you can even enjoy the benefits of retirement planning. In plans like endowment policies and ULIPs, you get to enjoy maturity benefits that can serve as a reliable corpus to start your retirement phase. You can even opt for pension plans that give you the option to receive lump sum payouts or periodic payments.

It secures your child’s future

Life Insurance helps secure your child’s future. If you time your policies right, you can meet the expenses required to get your child into a good university with the benefits obtained from your Life Insurance plan. Policies like ULIP can help you grow your money adequately, so you can give your child the best education possible. You can also make use of the benefits from your plan to meet the expenses for your child’s wedding.

Life Insurance also offers tax benefits

In addition to the above reasons, you also get to enjoy tax benefits from your Life Insurance plan. As per Section 80C of the Income Tax Act, the premiums you pay for your plan are deductible from your total income up to Rs 1,50,000. Also, as per Section 10(10D) of the Income Tax Act, the maturity and death benefits received are also exempt from taxation.

Why Health Insurance is a must-have in your financial plan

Among the different types of insurance in the general category, Health Insurance is easily one of the most important covers to purchase. Let’s take a look at why Health Insurance needs to form a part of your portfolio.

Health Insurance covers medical costs

Medical expenses can become overwhelming very quickly, especially given the rising costs of healthcare. With a Health Insurance plan, you can meet these expenses without any significant financial stress. Medical insurance generally covers various costs like hospitalisation expenses, home care expenses, day care procedures and ambulance charges.

Health Insurance also offers coverage for critical illnesses

Critical illnesses like cancer, kidney problems, and Alzheimer’s disease can affect anybody. The costs associated with treating these conditions can be extremely steep. Fortunately, with a good Health Insurance plan, you can be rest assured that these expenses will be covered, at least to a certain extent.

It gives you additional benefits over and above your employer cover

If you’re a salaried employee, your employer probably has a Group Health Insurance plan in place. While this is indeed a good financial product to have in your portfolio, it may not be sufficient. Personal Health Insurance can offer you additional protective coverage, over and above what your employer may offer. It also gives you a more customised cover that’s tailor-made for your specific needs.

Health Insurance also offers tax benefits

Like Life Insurance, Health Insurance also offers tax benefits to the policyholder. The premium you pay is deductible from your total taxable income as per Section 80D of the Income Tax Act. The limit of deduction is generally Rs 25,000. For senior citizens, it is Rs 50,000. Additionally, you can also claim deductions for the premiums you pay on the Health Insurance availed for your parents.

Conclusion

So, you see why Life Insurance and Health Insurance are both important types of insurance to include in your financial plan? To experience these benefits, you need to identify the best Life Insurance plan and the ideal Health Insurance plan for your requirements and include them in your financial plan. This way, you can be rest assured that your financial future as well as the future of your family are secure.

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