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Protect First or Invest? It is not a Question of the chicken and Egg

The question of whether the egg came first or the chicken, is a teaser question throughout the generations. Our elders used this question for messing around with innocent young minds.

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However, when it comes to whether you should invest first or protect, the answer should not be that confusing. Investing is like filling fuel in the car, while protection is like buying a first aid kit and puncture repair kit before you start the journey. Starting on the journey without adequate protection is not only dangerous but will also be costlier, even without any contingent events. 

 

While both protection and investing are equally important aspects of personal finance, if you are starting with your job/career, you should prioritize getting your protection plans first. The reason is simple; you can begin investing once you have obtained extra capital from your job. However, if your health condition does not permit you to stay employed, then you would not be able to earn a living for your loved ones, let alone find excess funds to invest. So, if your financial plan consists only of bank deposits, mutual funds or pension plans, there is one big gaping hole in this plan - lack of term insurance.

 

There is nothing wrong with assuming that your savings and investments would give you significant returns in the next 20 years or more. Yes, this would work, but have you considered uncertainties of life? Without any protection, you are taking your life for granted, and this mistake can cost your family (if you are no more or if you meet with a fatal accident). Furthermore, your investments will take time to pay off while your term insurance protection starts immediately, once you have bought your policy.

 

Getting an adequate cover is more important than returns

When you see cloudy skies, you take the umbrella while stepping out of your house. When you look at the commotion on the road, you take a different route. Much like the umbrella, term insurance provides financial protection that automatically works in the event of the policyholder’s demise. Considering the risks related to the current lifestyle, the smart thing to do is get a cover to protect against those risks. Term insurance is the only product that pays you a significant sum for small payments of premium. Many educated people make the fundamental mistake of measuring term insurance regarding returns. In term plans, getting adequate cover is more significant than returns.

 

Be Smart, Change Your Thinking

Having a wrong mentality can act as a significant roadblock when it comes to buying a risk-protection product like term insurance. Remember that not every rupee spent has an immediate gain. Sometimes, money spent many years ago can come back and give you tremendous value. So, beware of the wrong mentality of ‘wanting return’ in insurance as this can force you down the slippery road, and you will end up with no cover at all.

 

Why Term Insurance Plan?

1. Lower premiums: True that! Yes, term insurance is far cheaper than most other insurance plans out there. Since term plan is a pure risk cover, there is no investment component, and it covers the untimely death of the life assured. The insurance company pays the nominee only in case of the life assured’s demise during the policy period. Hence, the affordable premium rates. At a young age, you pay less premiums.

 

2. Higher sum assured: If you have more liabilities and are ready to pay a higher premium, you can opt for a higher amount assured. You can go for the cover as low as Rs 25 lakh and as high as Rs 100 crore. Getting an adequate cover will mean that your family gets a high corpus and there is no more going through the hardship to make ends meet.

 

3. Customizable: Yes, term plans are customizable. You can select the policy period, coverage, and even payout options - lump sum payout or monthly income replacement options. If you think that your family members will not be in a position to handle an enormous amount of money (lump sum payout), you can opt for term plans that provide monthly income options. 

 

4. Riders: In Max Life Online Term Plan Plus, you can widen your coverage with the help of riders, which are optional but essential features under term plans. Rider benefits are available on payment of additional premium. For instance, a term plan with critical illness cover rider will provide a lump sum benefit on diagnosis of the covered critical illness (like cancer, heart diseases and other covered ailments). Such financial support will help you in hospitalization as well as non-hospitalisation expenses. Additionally, the money received will put your mind at ease about the medical expenses involved in the treatment of critical illnesses. 

 

Conclusion:

The roles played by both investment and insurance are on opposite ends of the spectrum. Simply put, investment increases your potential upside, while insurance protects your potential downside. So, protect yourself against the downside scenarios by purchasing the right term insurance plan!

 

ARN:- Sep/Bg/28K

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