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Term Insurance: The Critical Missing Piece In Your Financial Planning  

by tarunarya
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money

Many people don’t realize the importance of term plans but it’s an integral part of financial planning. Everyone knows about term plans but only a few understand the features and importance. Most financial experts suggest investing in term insurance plans for various reasons. And today’s blog we will tell you why you should include term insurance plans in your financial portfolio.  

A financial portfolio should have a healthy mix of high-risk, volatile investment instruments along with low-risk, guaranteed returns. This way, you manage risk and ensure you’ve created wealth over a long period.  

Your investments can also be segregated basis goals. In this approach, you invest a certain amount of low volatility investments for short-term goals and for long-term goals, you can choose to invest in the equity market or other high volatility instruments.  

No matter what approach you choose, investing in term insurance plans is crucial. Here’s why:  

Financial protection:

term insurance offers a financial shield that can help your family in case of an unfortunate incident. Term insurance plans protect the life of the insured for a specified term. This type of investment is critical for those households that have sole breadwinners. It also protects against disability and other life-threatening situations.  

Wealth creation:

several term insurance plans come with maturity benefits. The premium for such plans is high but it ensures you get a significant amount on maturity. The risk involved, therefore, becomes even lower. For those looking for high-return investments for wealth creation, term plans should be on your consideration list. 

Term plans are versatile in nature. Not only do they help in long-term wealth creation, they also help you reduce tax liability in the current financial year. The premium paid towards term plans can be claimed under Section 80 of the Income Tax Act, 1961. A maximum of rs. 1,50,000 can be claimed under this head. Several people invest in term plans solely because of this. In fact, in case of an unfortunate event, the sun assured that’s paid to the nominee is also tax-free. 

Diversified portfolio:

term plans may have fixed returns and such plans are not dependent or less dependent on the financial market. If you have a goal for which you are investing, you should consider a child education plan and other similar targeted term plans. This will be more effective than generic term plans.  

Add riders:

If you want additional protection, you should add riders or add-ons. This will strengthen your policy and also yield higher returns. This is also recommended for those people who are the sole bread earners of the house.  

These are the five reasons why you should invest in term plans. The sooner you start, the higher returns you will get. That’s why, it’s recommended to start investing as soon as you start earning. The premium payable would also be lower and as you grow, you can add more investments to your financial portfolio such as child education plans to secure the family’s future. To know more about term plans or child education plans or similar plans, reach out to the experts at Bharti AXA Life Insurance

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