Before the privatization of the insurance sector in India, insurance was more often than not used as a tax saving tool rather than a financial planning tool. Moreover, most people who bought life insurance policies did not consider it as a long-term investment.

These people while deciding on a life insurance policy preferred short-term returns rather than long-term gains. This was primarily because of lack of proper inputs from the agent, who usually had his own interest in mind (some policies pay a higher commission than others).

Insurance if carefully planned can help you achieve more than one goal. It can provide you –

• Family and Income protection
• Old age independence
• Children’s well being and advancement
• Life time aspirations

When we take a ‘money back policy’, for example, it gives us some portion of sum assured at regular intervals. More often than not we tend not to reinvest these periodic returns and rather use it to meet our short-term needs. When the policy matures, the value is considerably less (as you have already received most of it in installments). This policy would be make sense in case an eventuality were to occur while the policy is in force, as the insurer would pay the full sum assured to our survivors. But what if we were to live too long. What would happen to our family’s income protection and our financial independence in old age?

As someone rightly said, “The most difficult task which a person can be called upon to do is to finance his old age”. Indeed, this is very true and this is where most of us fail because we do not plan for the long term. One of the eventualities which life insurance takes care of is living too long but when we start planning short term it ceases to do that.

Needless to say, life insurance after all is not always money after death. It is also money that makes us financially independent in case we were to live long. It is upon us to start planning long term and do a thorough financial planning when we take our life insurance.

To know more about how Insurance can be used as a financial planning tool and how it can be designed to take care of most of the eventualities of life, please register here.

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