Life Insurance: Planning and Investment
Be prepared for unpredictable events by having investments and savings plan.
Using Life Insurance As an Investment
Life insurance is designed to offer financial safety for your family in the event of your death, but it also works as a good saving and investment plan that can help you meet various life goals.
Investing in life insurance can be one of the best and most important financial decisions you make. With life insurance as an investment, you can always be prepared in the event of an emergency and achieve your future goals, whether it is financial or educational goals. Last but not least, you should be able to provide financial security for your loved ones if you invest in life insurance.
Key Points
- Life insurance can be used as a long-term investment.
- There are some types of life insurance that have cash value and can convert premiums into cash.
- You can begin saving for retirement with life insurance.
What is an Investment Plan?
There are different types of life insurance in the market. Some of them, such as term life insurance, are pure risk covers, meaning they only offer protection. Others are a mix of investments and protection covers, which is known as investment plans. For some people, only the pure risk covers are enough. For others, a combination of protection and investment cover may be needed.
With investment plans, a part of the premium you pay is used to provide insurance coverage for you, while the remaining part is invested in the financial instrument as per your risk-taking capacity. This plan can help you fulfil your short-term and long-term financial goal is an ideal choice for anyone who wants to enhance their wealth and save taxes.
What are the Different Types of Investment Plans?
There are two types of investment plans available in the market. These include:
Unit Linked Insurance Plan (ULIP)
A unit-linked insurance plan (ULIP) combines insurance and investment. In a ULIP, a portion of the premium is deducted as insurance and the remaining amount is invested in the market. Depending on the investor, the funds can be invested in bonds, equity, debt, market funds or anything in between. A ULIP provides coverage as well as investment options. You can use it as a survival benefit and receive the maturity amount based on the current value prices, or you can use it as a Death Benefit where your beneficiary will receive the sum assured.
Endowment Plan
An endowment plan is a traditional insurance product with investment opportunities, endowment plans provide both coverage and investment. The premiums you pay over the course of the period are divided into two parts: a portion of the premium is invested, while the remaining portion is kept as a risk cover on maturity where the returns are guaranteed with profit. If the investor dies before the maturity date a beneficiary will receive the lump sum assured.
With investment plans, a part of the premium you pay is used to provide insurance coverage for you, while the remaining part is invested in financial instrument as per your risk-taking capacity.
What Are the Benefits of Including Investment Plans to Your Life Insurance Policy?
Having an investment plan offer numerous benefits, below are some of the benefits you can enjoy:
Creating Wealth
Investment plans that include life insurance are a sure way to build wealth over time. You can select the best plan for you based on risk, returns and the amount you want to invest in. For future references, when you need money for your child’s education, marriage, retirement, pension and so on, life insurance investment plans will come in handy.
Financial Protection
A life insurance policy protects a family financially by providing both survival and death benefits, as well as investment options. When a policyholder reaches maturity, he or she receives a profit on their investment. Even if the policyholder dies before the maturity date, the family’s long-term financial security is ensured.
Death Coverage
Not all investment options provide death risk coverage like life insurance investment plans. These plans cover the possibility of death and ensure that your family’s financial needs are met even if you are not present. The sum assured is paid to the beneficiary in the event of the policyholder’s death.
Retirement Savings
These investment plans are available at any stage of your life. One can purchase and construct funds that can be used later in life. As a result, the investor will be financially independent even after their retirement days.
Flexibility
The flexibility of the money to be invested as well as the duration will depend on the needs and planning one can choose in particular.
Save Taxes
Investment plans not only protect you from risk and help you build wealth, but they also help you save money on taxes. It’s the perfect balance of savings, wealth creation, financial security, and tax benefits.
Investing in life insurance should not be viewed as a burden but rather as a necessity, both to protect you and your family from risks and to provide greater peace of mind.
What to Consider Before Purchasing an Investment Plan
Purchasing an investment plan is not something to be taken lightly, as there are numerous factors you need to consider, these include:
Dependents
One of the most important factors to consider before purchasing an investment plan is your dependents. You must determine the number of dependents you intend to cover under a plan such as your spouse, children, parents, in-laws and so on.
Financial Goals
Financial goals will assist you in determining the amount of investment you want for future use and determine whether you have would want long-term or short-term goals.
Current and Future Liabilities
This will assist you in determining the amount of investment that must be dedicated to the investment plan without risking your current lifestyle and standard of living.
Insurance Coverage
Make sure you purchase a comprehensive insurance policy with a high sum assured; this will ensure that all of your financial goals are met.
Extra Income
Always divide your investment sum with different policies, one-half of the sum should be invested in life insurance plans while the other half should be invested in pure investment plans.
Premium Amount
The premium amount is the amount you must pay toward the insurance plan, a premium calculator can help you determine the appropriate premium.
What is the Importance of Investing In Life Insurance?
The significance of purchasing life insurance cannot be underestimated. Life insurance is designed to provide financial protection in the event of the policyholder’s death, as well as serve as a sound investment strategy that helps you achieve a variety of life objectives. The life insurance industry in Thailand has been steadily growing for the past few years as more people realise the importance of purchasing life insurance. Young adults can benefit from life insurance because premiums are lower for younger people, it can be used as a tax deduction, you may not be able to get a life insurance plan at an older age, and it can provide peace of mind for when you pass away.