Wealth Guide: Why insurance needs to be included in your yearly financial plan - Expert cites reasons

Wealth Guide: A couple of months into the new financial year, most of us would have an idea of our financial plans for the year and would look for various investment options and tools to build our investment portfolio. A strategic financial plan is significant to build and protect one’s investment portfolio. It should include multiple elements like long-term investment plan, tax reduction strategy, emergency funds, risk management, which helps in building the corpus, as per one’s risk appetite.

However, there is one aspect in the financial plan, which is often overlooked – Insurance plans. In most cases, rather than availing insurance as a precaution, most people consider insurance only when they become the victim of an untoward incident, that results in making payments out of pocket. While giving financial protection to an individual and the family is the primary goal of any insurance policy, there are many other reasons why people should opt for an insurance policy.  Indraneel Chatterjee, Co-founder, RenewBuy, shares his knowledge on why insurance needs to be included in your yearly financial plan.

Protecting oneself in the looming inflation scenario 

"In the current global scenario, with the pandemic still ongoing and the threat of recession looming over the world, consumers need to be aware that inflation will continue to increase. If one takes the example of global economic crisis, where the economic scenario is volatile in most of the countries, and where the state of jobs and inflation is at doldrums, one can imagine how detrimental it can be if someone gets hospitalized without an insurance policy. Thus, a significant portion of the money should be invested into safeguarding one’s life, health, home, vehicles, etc., to protect oneself in case of any kind of macro-economic problem any country is facing. With the current economic conditions worldwide, looming inflation, recession, and unpredictable job market, it is always suggested to take a financial protection cushion beforehand," Indraneel Chatterjee said.

Tax benefits

"Life and health insurance plans provide tax saving benefits too. Life insurance premiums qualify for  deductions under Section 80C while health insurance premiums qualify for deductions under Section 80D. Additionally, under life insurance plans, death benefit is completely tax free. Even the maturity benefit is tax-free (under certain terms and conditions). Thus, insurance is also an important tool for tax savings plans for an individual," Chatterjee added.

Long-term protection

"Insurance is vital, which will help in safeguarding the wealth created in one’s life and meet specific milestones. Today companies are providing multiple insurance policies, which cater to multiple life goals of a person. The policies offered specially, in the health and life segment are so extensive, that there is almost a policy for every life goal. Life insurance, for instance, goes beyond providing only protection, it is also an important tool to achieve financial objectives related to wedding, child’s education, buying car, buying a home, etc. It is also an excellent savings option for long term, which assures a guaranteed maturity amount based on one’s risk appetite and need," he suggested.

Building a retirement corpus

"Another benefit of signing up for insurance is that it helps build a retirement corpus. Insurance helps consumers to systematically save and build corpus for retirement over a long term. Many insurance companies have come up with retirement plans which are majorly annuity-based products. People usually overlook the need for insurance, thinking that no emergency situation can affect them in life. In most cases, people feel the ardent need for insurance when the unforeseen circumstance has already happened and they pay out of their pocket, burning their savings. Thus, the importance of making insurance an essential part of financial plans goes further and beyond," he explained.

"Another benefit of signing up for insurance is that it helps build a retirement corpus. Insurance helps consumers to systematically save and build corpus for retirement over a long term. Many insurance companies have come up with retirement plans which are majorly annuity-based products. People usually overlook the need for insurance, thinking that no emergency situation can affect them in life. In most cases, people feel the ardent need for insurance when the unforeseen circumstance has already happened and they pay out of their pocket, burning their savings. Thus, the importance of making insurance an essential part of financial plans goes further and beyond," he explained.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)