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Continuing the Knowledge Series- Today we will understand the meaning of Financial Planning and the importance of Insurance in Financial Planning.
India is a Country where we all believe in savings and we save money for our Future goals; like- Kids Education, Kids Marriage, Retirement, Buying House but its needs a proper financial planning so that all the milestones are achieved properly.
In Financial Planning, Insurance plays a very important role, so let us first understand the meaning of Insurance in Financial Planning
Insurance:
Insurance refers to a contractual arrangement in which one party, i.e. insurance company or the insurer, agrees to compensate the loss or damage sustained to another party, i.e. the insured, by paying a definite amount, in exchange for an adequate consideration called as premium.
It is often represented by an insurance policy, wherein the insured gets financial protection from the insurer against losses due to the occurrence of any event which is not under the control of the insured.
Financial Planning:
Financial planning is the process of meeting your life goals through the proper management of your finances. It includes elements of protection, wealth creation, planning for contingencies and emergencies, as well as planning for specific milestones in life. But where does life insurance fit in?
Insurance is a very crucial part of everyone’s financial plan. Staying prepared for the unforeseen would ensure that you could still accomplish your goals even after encountering a financial crisis. An insurance policy would help to preserve your emergency fund in case of emergencies. Insurance could also protect your family if you’re part of an accident and have sustained injuries, become disabled, ill, or die(Some situations could be very expensive for the ones with no insurance coverage, so it is vital to have any policy you require depending on your financial situation).
Below are some of the major categories of insurance which should form part of everyone’s financial plan:
Life insurance:
Life insurance works as a Financial cushion and lumpsum amount(Term/Savings Plan) is payable on the demise of the insured. And it can provide the insured’s spouse, children, and dependents funds essential for helping them maintain the standards of living, could help in repaying the debts, and could also help in funding the education costs of children. The amount one needs depends on one’s financial situation. A life insurance plan is also a tax-saving tool since the insurance premium that you pay for your insurance policy is eligible for income tax benefit u/s 80C(150k) of the Indian Income Tax Act. The policy proceeds that you receive from the life insurance company are also exempt from tax
Health Insurance:
Health Insurance can help to safeguard finances and to meet out the hospitalization expenses(against medical emergencies and critical illness). Health insurance policy could reimburse all medical expenses during your hospitalization(upto the sum assured). We just need to furnish the required documents which prove that you were under medical supervision. Now these days, health insurance policies are available with Cashless benefit, where insurer would directly pay the medical bills to the hospitals. A health insurance plan is also a tax-saving tool, the premium that you pay for your health policy is eligible for income tax benefit u/s 80D(25k self+ 50k parents) of the Indian Income Tax Act.
Auto insurance:
Auto Insurance protects one from the damage to the considerable investment in a vehicle from liability for the damage and also injury sustained by you or others driving your car. It could also help in covering the expenses you or others in your vehicle might incur due to an accident with an uninsured motorist. Auto insurance is crucial for people owning a vehicle.(It is mandatory to insurance your vehicle).
Sticking to an insurance plan is very crucial part of the financial plan. Annually, you should also review your insurance and make required adjustments. Having insurance isn’t enough – it should meet all your needs. Additionally, it is crucial to understand all the features and terms and conditions of the insurance policy so you’re aware of exactly what you’re covered for.
Conclusion:
Knowing how relevant insurance is, it’s best to purchase life and health insurance plans as early as you can. This is because the premiums for these kinds of insurance generally increase as you age. Aside from these types of insurance, it’s also a good idea to invest in motor insurance and home insurance if you own a vehicle or a house.
To know more, please click on the below link.
https://posp.plinsurance.co.in/quote (for Brokers/PP’s- B2B)
http://plinsurance.co.in (for clients- B2C)
(With the help of this link(App) you can take quote(GI/HI/LI) and can also login the policies there itself).
Please feel free to call/ to discuss anything related to Insurance.
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Image and article originally from www.plindia.com. Read the original article here.