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Match your life's goals with insurance

Insurance is not an instrument from which to look for return. While savings-linked insurance policies do generate moderate returns, the term plans do not.

June 20, 2015 12:51 IST | India Infoline News Service
Every individual has goals for her life and insurance is not quite an instrument to help achieve those goals. But it can help to keep those goals in mind while buying an insurance policy to build adequate insurance cover and tackle any change in the situation that may disrupt your financial position.
 
Insurance is not an instrument from which to look for return. While savings-linked insurance policies do generate moderate returns, the term plans do not. Term policies are pure protection plans, which can help only in the event of demise of the breadwinner or the insured.
 
A lot of people try to go for high insurance covers. But do you really need it? The size of an insurance cover depends on the number of dependents one has and also there financial status. If there is just a single dependent and the financial condition is good, a huge insurance cover may not be necessary.
 
Using insurance products to achieve your life goals is not a great idea. Instead they are good to secure your life’s goals. For instance, a child education policy can ensure the kind of education you aspired to give to your children even if you do not live to see the day. Similar arrangements can be made for your daughter’s marriage or even for your home, on which you may have a huge loan burden, which you would not like to leave behind on the shoulders of your family if something goes amiss.
 
Remember, insurance policies are structured and positioned in a certain way and one must see the actual use to which the policies can be put to, and then match what can be done with what is available.
 
A life insurance policy can meet four financial needs. In order of priority, these are financial security for the family if the person dies, forced savings over the years, investment returns and tax savings. Begin with the first priority and purchase a term insurance for your wife and yourself. As for forced savings, this is a priority is that most of us are not disciplined about savings. Purchasing a financial product that requires periodic investment is a good way to do that.
 
Another thing to consider while taking an insurance policy is to look at the long-term situation, and not just think about the next three or five years. This would make it easier for you to decide what kind of insurance policies to go for to meet different needs. This will also help you realise the true benefits of an instrument, and also get the best out of the situation.

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