When the doctor said “renal failure”, you were stunned for a little while. You couldn’t believe it had happened to you in your 40s. You had always thought you would stop drinking and smoking and take care of your health once you were past 35. But 35 came and went and your lifestyle never improved. And now, at just age 42, you would need surgery at a premier hospital and several lifestyle changes to return to normal health. Treatment would cost close to Rs 5 lakhs at a good hospital…
And you do not have a health plan. The money you have saved up for Madhav’s higher education will have to be used.
All this while you were relaxed because when you bought that life insurance policy early on in life, you thought it would take care of all your insurance needs. But will that one policy financially cover your health, child’s education, retirement, and investments? ABSOLUTELY NOT.
The above is an example of poor financial planning.
Insurance is not about having only one policy. Just as you need various ingredients to make a complete dish, you need various insurance policies for a complete financial portfolio to fulfil all your financial needs at different life stages.
Why Having Just a Life Insurance Policy Is Not Enough?
Here are a few reasons why having one life insurance policy is not enough:
- A life insurance policy won’t provide returns/income or fulfil your financial needs while you are alive. It only helps your beneficiaries after your death.
- Creating wealth for your future needs and goals is impossible with life insurance.
- A life insurance policy will not be able to financially help you during health emergencies.
- It will not provide monthly pensions (income) post retirement.
- Goal-oriented savings for specific needs like child’s education, marriage, maternity, or starting a new business are not possible with a life insurance policy.
Having said that, you need to remember that a term plan (which is also a type of life insurance) is an important ingredient of your financial planning.
How Do Different Insurance Policies Help Build a Strong Financial Back-up?
Let’s run through the following example, which will help you understand how different insurance policies help at different life stages:
The role of insurance policies at different life stages
Suggested Reading: 5 must-haves in your financial portfolio
To gather all the important ingredients for your financial portfolio, compare and buy various insurance plans like term, health, child, retirement, ULIPs, money-back, and so on based on your needs, age, and income.
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