In the wake of increasing inflation and changing lifestyles, it is imperative for every individual to focus on financial planning at an early stage. A financial plan of an individual should be customised to meet one's individual needs at different stages of life and it is important to have a balanced mix of instruments to address the various needs of protection, savings and wealth creation. It is observed that people tend to focus on the 'wealth creation' aspect of financial planning and the 'protection' element often gets compromised or neglected.
Why Life Insurance?
Life insurance is still a nascent idea and most people do not think about it until a major life change causes them to consider what might happen to their loved ones in case of any unforeseen circumstances. While the main objective of buying a life insurance policy is to protect oneself from unforeseen circumstances, it can also help in wealth accumulation, preservation, and give access to liquidity at the right time, if added as a component of financial planning.
Most of us usually get confused on how much to invest and where to invest – stocks, bonds, real estate and many others. Life insurance is a good investment tool, which is comparatively simpler, more affordable and most importantly caters to the different stages of the individual’s lifecycle.
You can buy a pure protection plan (a term plan) at an early stage which is most affordable or a unit linked plan at a later stage which gives you the opportunity of earning higher returns, but involves market risk. There are specific education plans which ensure that your child’s education is not compromised in case of an unfortunate situation and you can also plan your retirement through pension plans.
