Benefits of Including Insurance in Your Financial Portfolio

August 23, 2023

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Whenever someone wishes to build a solid financial portfolio, they often prioritize savings, investments, and retirement plans. However, one of the most essential things is commonly overlooked, which is insurance. The benefits of Including Insurance in Your Financial Portfolio are one of the best things. Insurance plays a vital role in safeguarding against mishappenings.

Things like illness, job loss, accidents, or property loss are beyond anyone’s control. However, having insurance in your financial portfolio helps to minimize the losses in monetary terms. Including Insurance in Your Financial Portfolio strategically acts as a safety net, offers tax advantages, and ensures comprehensive financial security.

This article will discuss the importance and benefits of Including Insurance in Your Financial Portfolio.

Term Plans in Your Financial Portfolio

Term plans are the classic and pure form of insurance. These plans act as a safeguard for your family during your absence. You need to pay small amounts as premiums for a set period in return for risk coverage.

In case of the policyholder’s unfortunate death within the policy period, the amount is given to the nominee. Because of their stability and security, term insurance plans should be as insurance in your financial portfolio. They not only provide safety but also help you save taxes up to your premium amount.

Additionally, the assured sum you’ll receive after the policy’s maturity is tax-free. One thing to note here is that to avail of these tax benefits, you should make sure that your annual premium is not more than 1/10th of your cover amount.

Top 10 Benefits of Including Insurance in Your Financial Portfolio

Here we discuss the benefits of including insurance in your finance portfolio

1. Protection from the Unpredictable

Life is unpredictable, and even the most well-planned financial plans can fail because of unforeseen events. Critical illnesses, untimely deaths, job losses, and property damages are among the challenges that can shake your financial foundation.

Insurance policies act as an umbrella to protect you from this turmoil. Insurance in Your Financial Portfolio is like the cushion safeguarding you from the financial aftermath of these misfortunes.

2. Tax Optimization for Enhanced Savings

Besides its protective aspect, insurance is a powerful way for tax optimization. Many insurance investments fall under the EXEMPT-EXEMPT-EXEMPT (EEE) category, making them highly tax-efficient. This means everything from the premium amount to policy profits and the assured sum is tax-free.

Using Section 80C of the Income Tax Act, insurance premiums can substantially reduce your taxable income by up to Rs. 1.5 lakh, reducing your tax liability by up to Rs. 45,000. Some things to note here are: if your nominee already has some estate taxes, the death benefit can be used to counterbalance them. If you have chosen a permanent policy like the universal life, the policy’s cash value can increase in a tax-deferred manner.

Therefore, in such cases, the cash values of the policy can be used in a tax-free manner. Hence, if you have a source of income to use in a tax-free way, you need it. However, if you want to access the cash through loans or partial surrender, the death benefit and the overall cash value reduce substantially.

3. Medical and Critical Illness Challenges

Medical Insurance is as essential as life insurance in your financial portfolio. It provides safety from the overwhelming expenses of hospitalization and security in emergencies.

These policies provide peace of mind while empowering you to claim deductions from your taxable income, thereby minimizing your overall tax liability. You only need to submit the required documents to claim medical insurance benefits.

Benefits of Including Insurance in Your Financial Portfolio also go for medical insurance. You can save tax on the money you spend on medical expenses for yourself or your dependents. Up to Rs 25,000 can be deducted under the Income Tax Act of section 80D if your parents are not senior citizens. For senior citizens, the amount is limited to Rs. 30,000.

You can choose from these four types of health insurance in your financial portfolio:

Medical insurance plan: The medical insurance covers expenses when the hospital visit is for more than 24 hours. You can get your money reimbursement.

Critical insurance plan: As the name suggests, this plan protects against critical illnesses like cancer, neurological disorders, etc.

Hospitalization plan: Under this plan, the insurance company directly deals with the hospital to settle the bill. The hospitalization plan is exclusive to cashless health insurance plans.

Super top-up plan: These plans are designed to provide an additional benefit over your existing plan’s benefits. They are generally an upgrade or a top-up to the current basic plan.

4. Child Plans

Including Insurance in Your Financial Portfolio for children is essential to securing your family’s overall well-being. You can choose from money money-back plan or children’s endowment plans. Child plans give a pre-decided sum assured to the children after their parent’s demise, and the remaining premiums are waived.

Apart from financial security, child plans also provide significant tax savings. You can claim deductions worth INR 1.5 lakhs on your premiums under Section 80C. The sum assured that the child receives is also tax-free. This is one of the best benefits of including insurance in your financial portfolio.

5. Retirement with Pension Plans

Proactive retirement planning is an essential part of financial prudence. To ensure a comfortable post-retirement life, you should have a good mix of investment and Insurance in Your Financial Portfolio. And the earlier you start, the less you pay in premiums for a secured future.

The retirement plans have two phases:

The accumulation phase: During this phase, your premium payments accumulate for a time period equal to your policy tenure. The amounts in these plans are generally invested in IRDA-approved securities.

The vesting phase: During the vesting phase, you start getting the pension you chose. The ideal age is between 40 to 70 years.

Under Section 80CCC, you can avail of deductions of up to Rs. 1.5 lakh on premiums paid, while a fraction of the withdrawn amount upon maturity remains tax-free.

6. Payments of Expenses

One of the options for whole-life plans is cash value. During a particular time period, the cash value accumulates to become a valuable asset. This cash value can be used in various places. You can use it to make down payments for your home, pay tuition fees, or boost your retirement income. You can enjoy the Benefits of Including Insurance in Your Financial Portfolio.

7. Wealth Creation and Legacy Planning

Beyond protection and tax advantages, insurance serves as a potent tool for wealth creation and legacy planning. Certain insurance policies, such as whole life and endowment plans, enable you to accumulate wealth over time.

Additionally, insurance can facilitate the seamless transfer of assets to your beneficiaries, ensuring a smooth transition of wealth and minimizing potential disputes.

8. Helps to Retain the Lifestyle Even in Your Absence

If you are someone on whom the whole family depends, Including Insurance in Your Financial Portfolio is the first thing you should do. The benefits of Including Insurance in Your Financial Portfolio are not only limited to tax savings and financial stability but also to give continued support through all life’s challenges even when you are not there.

Though your value is immeasurable emotionally, you can at least ensure that they do not face any shortcomings even when you are not around.

9. Affordable

It may seem intimidating and one might think that they’ll have to pay a hefty price for insurance considering the benefits it covers. However, the reality is starkly different. You can get insurance by paying a price as low as two movie tickets. By including insurance in your financial portfolio, you can observe affordable coverage.

You can contact a professional insurance agent to understand what plan would suit your needs and situation best. Once you finalize, you should jump into Including Insurance in Your Financial Portfolio without thinking too much, as the benefits are tremendous for such a small price.

10. Safe Investment Option

Including insurance in your financial portfolio not only makes you free from the financial worries of the future, but it is also safe in terms of market fluctuations. The term plans are not affected by market trends in any way, making them a safe investment option.

Conclusion

Including Insurance in Your, Financial Portfolio goes beyond mere protection; it provides overall financial empowerment. Insurance gives many benefits, from protecting against life’s unpredictability to optimizing tax liabilities.

Making sound decisions to create decent avenues for wealth creation, Including Insurance in Your Financial Portfolio is one of the best decisions you can make to secure the well-being of your family.

A well-rounded financial strategy should always include insurance in it. By including insurance in your portfolio, you craft a strong foundation that empowers you to navigate the complexities of life with confidence and assurance.