I have been in India for four years, and during my stay, I have seen the socio-economic profile of the people change dramatically. Today people are not only spending on products and services, earlier considered a luxury but are also looking at smarter ways of investing their money. This is mainly due to the fact, that people today not only have a wider choice of investing in different saving instruments, but are also more educated and aware about their choices. People are now moving beyond the traditional saving options of fixed deposits, post office savings to more wider investment options in the form of insurance, mutual funds, bonds, equities and even property.

In today’s rapidly changing financial environment, it is critical that individuals not only protect and enhance their current financial resources, but also prepare for future security and against loss of income. This requires careful planning and prudent management of one’s financial assets.

Financial planning is the key and the first step towards fulfilling ones dreams and aspirations whether it is about providing for the family, buying a home or a car. Good planning also ensures financial security for the family throughout life, even in the eventuality of the death of the earning member of the family. An important component of a sound financial plan is not only the inclusion of life insurance investment but also providing for adequate insurance coverage in the plan. It is therefore critical for individuals to discuss their unique needs with qualified Financial Planning Advisers who can assist in determining the right plan and amount of coverage required.

Life insurance is a key savings instrument. With the advent of private life insurance companies in the market, consumers are now exposed to an array of modern and innovative products. Depending on the needs of the customers, life insurers have introduced customised products in the market. Insurance can help you for specific needs like saving for child’s education, marriage, purchase of a house, retirement and also for earning higher investment returns.

Secure your child’s future - Child policy

If you are planning for your child’s future and looking at his/her higher education, marriage, you should invest in a child policy. Insurance companies have introduced policies, which help the parents plan for the financial needs of their child like education and marriage. Investment in such policies not only helps them save regularly for the child’s future but also protects the financial future of the child in case of the unfortunate death of the parent (life insured).

Creating savings and protection for the family - Endowment policies:

Looking at future needs, insurance can offer you specific savings plan. By choosing an appropriate premium level and term, you can match the maturity date of the policy to a specific savings need such as planning your future requirements of the household. A critical component of financial planning for any kind of saving is to secure the financial future of your family in case of any eventuality to you. Investment in life insurance addresses this core issue by offering a life cover on your investment.

Earning returns on investment - Unit Linked Products

Modern life insurance products have evolved from purely protection products to mature investment instruments. Private life insurers have launched Unit Linked products which offer customers returns comparable to other financial products available in the market. Unit Linked products are designed to directly link investment returns to the performance of the fund. The policyholder therefore gets the benefit of a rise in the market. Compared to a traditional insurance product, investment in a Unit Linked product offers more transparency. Investors can regularly track the returns of their investment as companies provide daily Net Asset Value (NAV) listings in the financial dailies. Further professional fund managers managing the funds invest prudently by ensuring that there is not much exposure to equity.

Companies also offer different fund options to suit the varied needs of the customers. The advantages of having different fund options are that a person has the flexibility to choose the fund depending on his risk appetite. Moreover, with changing needs the investment in funds can also be altered. Planning for retirement - Pension

The retirement age is coming down. With better medical facilities, life expectancy has increased. Hence people have to plan for their security for more number of years post their retirement. The breakdown of the joint family system has resulted in lesser economic dependence on the family. Against such a background, people not only need to start saving early but also create a decent corpus of saving for their post retirement life. Planning for retirement therefore is a key concern. While the funds required for your retirement will depend on your individual needs, however, a person usually spends during retirement 75-80 per cent of what is spent while working. This is because some expenses like fuel come down, while others like medical expenses go up. Other factors to be kept in mind are inflation and the rate of return on your savings. The basic objective in saving for a pension plan is to create a corpus of savings over a period of time to ensure your financial security post retirement.

The pension market in the country is on the forefront of reform. With the market opening up, new players would be offering various choices to the customers. Several life insurance companies are now offering the option of investing in Unit Linked products for their Pension policies, allowing the customer to take advantage of a market return on his investment.

While building up your investment portfolio, saving in insurance is a critical tool. It not only ensures financial protection for your family in case of any eventuality but also offers you the option to save, both through investment in market instruments as well as a more secure traditional route.

Source: The Financial Express