Having financial security is of utmost importance in life. You can make the most of your life and simultaneously have peace of mind. But, it takes continuous effort. Financial products are not only meant for emergencies but also for different ages in life.
In this blog, you will learn about the 5 financial products you need to have a secure life.
Also read about: Best Finance and Credit Options for Individuals
5 Essential Financial Products Key to a Secure Life
Retirement Plan
A pension plan provides a tax-free monthly income and ensures a secure future. Start saving early to benefit from compounding. Options like EPF, PPF, Private Pension Plans and NPS offer solid foundations. Diversify with ELSS for higher returns and use retirement calculators to plan your corpus effectively.
Also read about: Guide For A Financially Secure Retirement
ULIP
While ULIPs and mutual funds function within the same market, they provide customers with a wide array of investment options, as well as differing levels of risk exposure. Starting a ULIP early can yield huge benefits. It is possible to pay for both investments and life cover either on a monthly or annual basis, with the former variable but the latter fixed component depending on market risks.
ULIPs are suitable for creating long-term wealth and recommended for any individual who has a minimum of 5 years to invest in such a product since the possibility of switching from one fund type to another is so easy that it allows an investor to modify their investment strategy based on changing market conditions.
EEE tax benefits may be gained if invested through ULIP; however, this policy could be denied for ULIPs purchased after February 1st, 2021, with annual premiums above Rs 2.5 lakh.
Health Insurance
Health insurance is essential to offset escalating medical expenses and unexpected illnesses or emergencies can deplete savings due to high hospital bills.
For young people to protect themselves against a range of illnesses, hospital stays, childbirth costs, and other big and small health concerns that may develop in their lives, individual health insurance coverage is tailored to their needs
Health insurance premiums are tax deductible under Section 80D of the Income Tax Act. The amount of the deductible varies according to the insured persons: you, your spouse, children or parents, in case you’re buying a comprehensive health insurance plan.
You can save up to Rs. 25,000 on premium for yourself, spouse and children and an additional Rs. 25,000 if your parents are insured. For parents above 60 years, the tax exemption is Rs. 50,000.
Emergency Fund
After securing the essentials, make it a priority to build an emergency fund. Contingency planning comes with costs; without job loss insurance, the responsibility falls on you. Aim to save three to six months’ salary, considering uncertainties like COVID-19.
Keep in mind that funds in an emergency fund may not yield significant returns due to low interest rates. Systematically allocate a portion of your income to this fund and use instruments like Recurring Deposits or Liquid Mutual Funds for better returns and exposure in the Indian financial market.
Also read about: Smart Emergency Funds Credit as Per Your Choice
Term Insurance
A term insurance plan, on the other hand, gives the highest life cover available in the market with the lowest premium, requiring no investment. Premiums are an exponent of an age and a policy term, and the earlier we purchase the product, the lower the premiums will be.
Term plans are available for as short as 10 years – which can be suitable for covering loans such as your mortgage. For the same tenure, you can get plans with higher life cover linked to your income growth.
The term of the plan is extended up to the age of 70 or 75. However, the rate of premium remains the same for the entire policy term, with tax advantages provided under 80C of the Income Tax Act and death benefits under 10(10D) of the Income Tax Act.
Additional riders for specific coverage can be added for a nominal fee.
These are the top 5 financial products you need in your entire life to enjoy a tension-free journey. Effective financial planning can happen when planning with strategic goals which will take you toward a sound and satisfying life.