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Why Life Insurance should be a part of your Investment Portfolio
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Life can often be unpredictable, and you never know what it's going to look like a few years down the line. Still, your best bet is to plan for all scenarios and hope for the best. This planning is especially crucial when it comes to your finances: you need to ensure that your financial portfolio can deliver when needed the most.
One crucial aspect of this involves making Life Insurance a part of your financial plan. There are many reasons why you should consider it. Let us walk through some of these reasons.
Reasons why Life Insurance should be a part of your portfolio
Here is why Life Insurance can be a great option for your investment portfolio.
1. Plan for Your Retirement
Not every investment will help you plan for your retirement. A lot of financial institutions will provide tailored Life Insurance plans that you can purchase, but in these cases, the earlier you invest, the greater the returns. It helps create a corpus amount and would provide a regular income after retirement in the form of a pension.
2. Save on Taxes & Achieve Long-Term Goals
Life Insurance, also known as a protection plan, comes with multiple benefits which go beyond providing a financial safety net for your loved ones; it also helps you achieve your long-term goals and save taxes. Under Section 80C of the Income Tax Act, you can get tax deductions on the premiums paid (up to Rs. 1.5 lacs). This lowers your investment cost while providing long-term value. You can also achieve your long-term financial goals, like paying for your child’s higher education or owning a home, by investing in Life Insurance products tailored for savings or earning market-linked returns.
3. Risk Protection
Life Insurance will protect you against life’s uncertainties, including an unfortunate demise. If the insured passes away, then the nominee gets the assured sum. It can help them handle their regular living expenses and secure their future.
4. Managing Financial Debts
Life Insurance is a great tool for the insured’s nominees and loved ones to manage their financial liabilities. The assured sum will ensure that your nominee can pay off their outstanding obligations. So, it also works as a safety net to make them financially secure.
5. Developing a Saving Habit
Saving for your life’s goals is extremely important. Therefore, Life Insurance helps cultivate that habit and makes you financially disciplined. Failing to pay the premiums on time could come with consequences, and this encourages the insured to practice budgeting and being mindful of their expenses.
6. Keep your Money Safe
Your hard-earned money will remain safe from market volatility through the Life Insurance policy term. Depending on the product you choose, you may receive a guaranteed sum that can help you meet your life’s goals. In a financial emergency, you can borrow against your policy’s cash value, giving you additional financial flexibility.
Summing Up
A Life Insurance policy can be a lifesaver because it not only provides a financial cushion for your life’s goals but is also useful for your nominee and loved ones. Even if you face an untimely demise, you will be able to leave a substantial corpus of money for those you care about. At the same time, it is also important to pick the right policy and select the one that will suit you the best.
FAQs
Q1. Are Life Insurance policies a good choice for long-term goals?
Yes, Life Insurance policies can be a great investment in the long run. It can help you acquire your dream home or even save money for your children’s higher education or marriage.
Q2. What is the difference between Life Insurance and other kinds of investments?
The difference between Life Insurance and other kinds of investments is that it will help you ensure the financial well-being of your family. So, your loved ones will be taken care of even when you are not around.
Q3. How can I invest in a Life Insurance policy?
Start with estimating how much Life Insurance coverage you need. Once you have determined that, start looking around for the best policy that will suit your circumstances. Then, determine whether you want to pay your premium all at once or in monthly or quarterly instalments.
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