As Indians, we put personal safety before everything else. Every day, before we leave for work, we check whether we have our wallets, cell phones, car keys, and house keys on us. We turn off all the lights, double-check if we have locked the doors securely, put on the seat belt, and only then start the car.
Even when we are shopping online, we put items in the cart that we like. Before making the payment, however, we make sure to check whether we can return them without any fee, in case the items are faulty.
When it comes to planning for life’s goals; therefore, it is imperative that you put contingency planning above all else.
When you put life insurance first in your financial portfolio, you can ensure that your loved ones remain financially secure throughout their lives, even if something serious happens to you. At the same time, your insurance plan helps you maximize your tax savings and work towards creating wealth. Like you cannot build your house without a firm foundation, you need life insurance to serve as the foundation to better and secure tomorrow for your family.
It would help if you prioritized buying life insurance before making any other investments, for the simple reason that the insurance benefit will help you secure your family’s financial future in case of your untimely demise.
Adding life insurance first to your list of must-do’s will not only get you additional benefits such as year-on-year tax savings up to Rs. 1.5 lakh under Section 80C as per prevailing tax laws and rider options to enhance your life cover against critical illnesses or a sudden loss of income due to accidents.
Moreover, having life insurance helps increase your risk tolerance. The primary goal of any investor is to grow money over the long-term.
Determining your risk tolerance and, subsequently, going with the appropriate asset allocation (the blend of stocks, mutual funds, and cash) is crucial. With life insurance in your financial portfolio, you can take more risk with your investments.
The significance of putting life insurance at the top of the heap of your financial investments can be understood through a cricket test match.
A test match extends up to 5 days, and for each day, the playing strategy changes — similarly, your financial planning changes, too, as per your life stage and financial requirements. Let us see how life insurance is crucial for long-term financial sustenance.
Day 1: After winning the toss, you start the day’s play with caution, leaving or defending the good balls and punishing the bad deliveries for runs. Similarly, as soon as you start earning an income, the first thing that you need to do is to create a fool-proof strategy against life’s contingencies. This is where life insurance becomes a vital cog in your long term plans. With life insurance in your kitty, you can make sure that your loved ones do not have to depend on anyone else to support them, especially when you are no longer there to help them accomplish their dreams.
Day 2: Once you have the backing of a cautious yet emphatic start, and an imposing first day of cricket, you try to build upon your previous day score. In terms of financial planning, the next stage after purchasing life insurance is to build on your savings through a mix of traditional and market-linked investments. You can consider traditional savings instruments such as bank fixed deposits, recurring deposits, and provident funds while building up your tolerance for more aggressive market-linked investments.
Day 3: You invite the opposition to best your first inning total and create a game plan to put your opposition on the backfoot. In life too, you prepare your finances against emergency medical situations and other unplanned expenditures with the help of health insurance. Together with life insurance and a health plan in your back pocket, you equip yourself and your loved ones against any crisis.
Day 4: Often, you have to second inning on this day – dig in deep to fortify your first-innings lead and work towards building a high total for the final day showdown. When it comes to creating a financial portfolio, it is now time for you to look for investment opportunities to help maximize your savings into wealth, so that you can effectively support your family’s goals, be it your child’s higher education, marriage or your spouse’s financial wellbeing. It is only through efficient financial planning and long-term capital appreciation of your savings that you can prepare yourself for your retirement.
Day 5: On the last day of the match, it is now time for you to put your total match score to test so that you can beat your opposition and put the crown of victory on your head. In life, too, the last stage of your financial planning is about bringing your savings and investment returns to fruition. You look to diversify your investment portfolio by including different equity and debt market instruments so that you can achieve maximal capital appreciation while minimizing the investment risks and ensure long-term financial sustenance.
Many investors tend to make a common mistake of investing in instruments without factoring their entire financial picture – the equity they have built-in their home, existing loans, and other liabilities. Ideally, every asset and investment you own should factor into your risk-reward equation.
Having life insurance in your financial portfolio allows you to take more risk when it comes to securing your life and making sure that you provision a significantly large financial corpus (in the form of insurance coverage) as backup against contingencies, while continuing to invest for other life goals. Moreover, with a life insurance plan in your pocket, you can be sure that even if something serious happens to you, your family will not have to deal with a financial crisis at any time during their lives.
The insurance plans will help your family stay financially protected, serving as a safety net that will prove useful in case of an eventuality. Also, the insurance coverage will augment the total accumulated value of your investments, making sure that your loved ones continue to have a lifestyle that you intended for them, even if you are not there with them.