insurance plans works as long-term savings and investments plans. As life insurance is long-term, the policyholder gets into a habit of systematic savings and the power of compounding aids his wealth creation. A mix of endowment, money back and long term pension plans should be part of every personal finance portfolio. Additional insurance covers in the form of riders can also be attached to the plans and that will enhance the scope of the cover.
Riders are essentially niche risk covers such as accidental death or contracting a critical illness. The incidence of such risks is low; however, if they do strike it can leave many of us in a situation much worse than death. Common understanding is that purchasing such riders is a waste of money as it is viewed as money spent that will never be used. But people should understand that without proper cover, there is a probability that they might get into a financial disaster. The solution is to understand one’s financial capabilities, liabilities and long terms saving prospects and buy life insurance. This should be reviewed as and when there is a change in income, increasing liabilities to match one’s lifestyle needs.
Unlike common perception, life insurance is not complex. If you can decipher your life stage needs, it is easy to choose a plan based on each need. To end I would suggest a 3 sided formula that will make it easy for you to buy life insurance - right time, right amount and right kind.
By Rajit Mehta, Executive Director & COO, Max Life Insurance