Investment is a reliable way to put your money to work and generate wealth. Investing in stocks, real estate and fixed deposits is considered to be some of the best investment options by most Indians. However, what most people often don’t realise is that investing in life insurance can not only protect their loved ones in case of an unfortunate incident but can also help them generate wealth.
Life insurance is more than just a safety net for an emergency in the life of an individual. It can serve as a strategic tool for wealth creation, especially for those looking for long-term financial goals. Let’s unveil how you can leverage life insurance beyond protection and security.
Understanding life insurance
Life insurance serves as a safety net for the insured individual in case of an unfortunate event. It is primarily a contract between the insured individual and the insurer, where the insurer promises to provide financial assistance in return for the premium paid.
Life insurance is designed to provide financial security to the family members of insured individuals by ensuring that they can easily meet their living expenses, even when the primary earner is no longer around. Depending on the life insurance plan and premiums paid, the amount received upon the death of the insured individual or the plan maturity varies.
Life insurance: Strategies to create long-term wealth
Interestingly, life insurance does more than create a financial safety net for the insured’s family. It can be used as a powerful strategy to generate wealth in the long term. Here are some key strategies to help you create long-term wealth through life insurance:
- Prioritising coverage and cost savings
It is crucial to balance out the coverage with cost efficiency. A plan that promises comprehensive coverage might also come at the cost of high premiums. You must evaluate and choose wisely. For instance, endowment is a type of life insurance that is designed to offer assured returns along with life coverage. Under this type of plan, a lump sum amount is paid in case the insured individual dies during the policy term. Also, if the insured survives the term, a maturity benefit is payable. In addition, the plan may also provide bonuses over the lump sum amount.
- Choosing the right plan
Choosing life insurance plans as investment plans requires smart planning. Here, understanding which plans offer what benefits is crucial. For example, choosing ULIPs or Unit Linked Insurance Plans not only provides financial protection but also helps in generating wealth by investing in different types of funds. This type of plan comes with a 5-year lock-in period, and the money can be invested in bonds or equities depending on the individual’s risk appetite. Through market-linked returns from systematic investments, ULIPs facilitate wealth creation.
Additionally, you can explore money-back life insurance plans as these offer financial support and regular income throughout.
- Focusing on efficient planning
As a policy seeker, you must understand that not every life insurance plan will suit your needs especially when you are looking for coverage and wealth creation. There are various life insurance plans that are worth exploring as they promise death benefits along with a cash value. Make sure you understand each type of policy and choose the one that best suits your needs.
- Retirement planning
Retirement plans are among the most sought-after savings plans. In a country like India, where longevity is on the rise, a retirement plan is everyone’s need of the hour. Investing in a retirement insurance plan helps build a sizable corpus to ensure financial independence. Creating long-term wealth through a retirement insurance plan becomes easier, and the potential for returns is promising.
- Exploring education investment
Life insurance is not limited to death coverage. For example, under child insurance plans, the expenses incurred on education and marriage can easily be taken care of. Through child insurance plans, you are at liberty to choose where your money is being invested since the premium paid can be invested in debts, bonds, equities, etc. You can explore ULIP child plans to create an income deposit against education inflation.
Did you know? According to a recent report, education inflation is approximately 11-12%. 1
Wrapping up
Appropriate investment strategies are the way to go forward if you want to generate additional income, whether long-term or short-term. With life insurance plans, you get to create a safety net while also generating income through investment and savings. The goal is to choose a life insurance plan smartly.
