Insurance as Savings Tool
Life is always unpredictable. No matter how much or how carefully you plan things, it will always throw you a curveball here and there. However, there are still ways to mitigate the risks that come with life, ways to provide for sudden big expenses and to protect your family even in your absence.
This is where life insurance comes in. Life insurance plans can provide for your needs for security and savings. It has products that, if weave into one’s asset allocation strategy, can act as an effective method to increase one’s money while providing coverage.
Life insurance used to have a bad reputation with people thinking that it’s a type of plan that largely benefits only the companies and the agents. However, just like every other type of insurance, it’s really something you must have and yet pray you won’t ever need – at least not in the near future.
To address this, companies have tied investment and savings features to life insurance plans to show its advantages that could be enjoyed during the policy holder’s lifetime. If these features are used well, it will be like hitting two birds with one stone – savings and insurance.
How?
Saving plans offer added benefits.
One of the ways life insurance works as a savings tool can be seen in plans that provide coverage for you and your family, but also provide the much-needed flexibility to withdraw money from your policy during your time of need.
Some, if not most, other insurance plans do not allow this as stated in policy clauses that state that you’ll end up losing money if you withdraw before your maturity date. Given this, it’s best to sit down with your agent to understand the consequences of pulling out a certain amount of money from your plan.
The worst that could happen is that it sets you back, but with a plan drawn up between you and your agent, your life insurance can serve as an emergency fund to support major or minor events of your life without losing your coverage.
Additionally, a host of insurers have begun to offer online term plans that have gotten popular easily to younger investors. Apart from the life coverage, these plans offer benefits of regular monthly income or increasing monthly income as per the choice of the investor. Products like these are attractive to those planning to take out a mortgage, invest in their child’s education, plan their marriage, and retirement.
New and improved ULIPs are effective long term investment plans
Speaking of long-term investments, another insurance product that can help insurance act as a savings tool is United Linked Plans or ULIPs. ULIPs offer tax-efficient and seamless transfer from debt to equity and back.
After much criticism, ULIPs now come with very low charges and are even cheaper than their corresponding mutual fund products. This makes it attractive and useful for risk covers, tax benefits, and long-term investments – all in one.
When availing of ULIPs, investors are asked to answer a set of questions that will determine their risk appetite. It ranges from low, medium, and high-risk options under the same policy. Afterward, they’re also given the flexibility to choose the investment ration and the sum set in the annual targeted premium. This makes it completely convenient as opposed to directly investing in the stock market.
Insurance builds saving habits.
Lastly, availing of an insurance plan builds the habit of saving. Although it sounds shallow, many people never really get into the habit of saving. With an insurance plan to pay for, it will almost be unnoticeable – you won’t even have to think about it.
To maximize this, it’s best to use the auto-debit feature for your payments. Soon, you’ll be surprised by the amount of money you’ve invested and saved.
In conclusion, as illustrated, life insurance products are no longer limited to life coverage but can also be used as savings tools. It’s not only capable of generating regular income but can also help you plan for important events in your life, and manage unexpected ones as well.
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