Benefits of Including Insurance in Your Financial Portfolio

Benefits of Including Insurance in Your Financial Portfolio

Insurance is a powerful financial tool that provides more than peace of mind to you and to your dear ones.

Naval Goel   
  • July 15, 2019  
  • |  
  • UPDATED   17:26 IST

Naval Goel
Naval Goel

Insurance is essential because itprotects you from the unexpected incidents in your life. It is definitely apowerful financial tool that provides more than peace of mind to you and toyour dear ones. It has a wealth of advantages that makes it essential to keep withinthe financial portfolio of the individuals.

Here are some of thebenefits which cannot be overlooked for keeping the insurance within yourfinancial portfolio:

Taxes: Yes, investing ininsurance can prove to be tax friendly in nature. The death benefit of yourpolicy will be paid to your beneficiaries without any income taxes. If theyalready possess some estate taxes, the death benefit can even be used foroffsetting them. If you have selected the permanent insurance policy, like the universallife, whole life or the variable universal life policies, the cash values ofthe policies even possess the capacity of increasing in tax-deferred manner.The cash values of the policies, in this case, can be used in the tax-freemanner. So, you actually possess a source of income which can be used in thetax-free way if you require it. But when you are accessing the cash throughpartial surrenders or loans, the death benefit and the total cash value willdefinitely get reduced.

CriticalIllness and Medical Insurance:  Whenyou are insured against critical illness and medical emergencies, you arereally staying in an advantageous position. The medical insurance policy canreimburse for all the medical expenses during your domicile care orhospitalization. You need to submit the necessary documents that prove you werein medical supervision for a certain period. If you want a cashless policy, theinsurer will directly pay your medical bills to your hospitals.

With all the advantages, the mediclaim policy can be helpful in claiming deductions from the taxable income and it will therefore decrease the tax liability. There can be various medical insurance plans from which you can choose:

  • Hospitalization Plan: All the cashless plans are included within this insurance policy. The insurer company directly makes the payment to the hospitals to decrease the financial burden of the insured.
  • Super Top-Up Plan: This plan is customized for providing the medical coverage additionally, if required, over your existing plan. They can also be used for upgrading the sum assured of your basic plan.
  • Medical Insurance Plan: If you are staying in the hospital for more than 24 hours, this plan will take care of all the reimbursements of the medical expenses under the specific terms and conditions.
  • Critical Insurance Plan: Terminal illnesses like cancer, neurological disorders and tumor are covered within this type of plans.

ReduceThe Risk: Insurance cannot be considered as a financialproduct. But adding insurance within your portfolio can improve the performanceof your portfolio. According to a study of a popular financial firm, the fixedincome part of the portfolio can be supplemented by including the whole lifeinsurance. This step will improve the performance of the overall portfolio anddecrease the risk.

ChildPlans:  Forensuring a secure career of your children, the child insurance plans are verynecessary. For ensuring the financial stability and proper tax planning, thechild plans stand among the top options of investment. In case of untimelydeath of the parents, the child receives the entire sum assured and even thepending premiums get waived off.

Paymentsof Expenses:  Cashvalue is one of the features if you opt for the whole life plans. During acertain period of time, the cash value gets accumulated to become a valuableasset. The cash value can be used for making the down payments on the house,pay the tuition expenses or provide a boost in your retirement income. As it isyour money, you can use it in whatever way it suits to you.

TermPlans:  Theterm plans can ensure the protection of your family in case of your absence. Itactually includes very small amount of premiums each year for a certain termand provides coverage for that specific period. In case of the sudden demiseduring the term, the coverage amount is paid to the nominee.

KeepsThings Going: Are you the person on whom your familydepends for their livelihood? Your family may include your spouse, your kids,your partner, and a family member with special needs or a close friend. Thoughyou really cannot buy love, you can at least ensure their financial security incase of your absence.

MoreAffordable than You Thought: Whether you areplanning for a family or just heading towards your retirement, life insurancecan really play a great role in your financial portfolio. As soon as youinclude the term insurance within your portfolio, you can definitely observethe affordable coverage. The premium price may be as less as buying two movietickets in a month. So, this can be the first step for ensuring the protection ofyour family when they need it the most.

Depending on yoursituation and financial status, you will have to choose your insurance plans.You can even contact your tax adviser for finding out how the insurance willaffect your tax planning strategies.

by, Naval Goel, Founder and CEO,