Life insurance: Your rock solid long-term ally

Life insurance is in for exciting times as a long-term savings tool. With optimism around a stable government and revival of the stock market, overall sentiments have been positive.

This, coupled with the prospects of a better economic future, has increased the confidence level of Indians leading to higher appetite for savings and investment products.

Like many other developed nations, India has a well defined and well regulated financial market providing a bouquet of savings and investment options starting from bank deposits, mutual funds, provident funds, pension and of course insurance, to name a few. The crucial question is, why do you need to give greater attention to life insurance products during 2015?

Life Insurance now has on offer an attractive range of products to serve your various life stage needs. While unit-linked insurance plans (ULIPs) have undergone a complete makeover with lower charges, traditional products too have been overhauled to deliver higher value to customers. Both have been redesigned to yield better long-term outcomes for the customer.

Guaranteed product solutions from life insurance are the only financial instruments that truly offer long-term guaranteed returns and income streams, which can help support a family’s long-term planning for liquidity and life stage events. Similarly, the revised pension plans from life insurance come with inbuilt capital and compulsory annuitisation, providing a steady stream of income in old age.

Also, life insurance as a product is suitable for people across various age groups. For India, which is primarily a young country with over 60 per cent of the population below the age of 35, insurance has mammoth potential. Typically, people who are in the initial or mid levels of their careers should think about securing their financial liabilities through protection and disciplined savings, which are well served by life insurance solutions.

As one grows older with responsibilities of children, child plans from life insurers ensure that children’s dreams are not compromised, even in unforeseen circumstances of death of the breadwinner. It has been observed that post retirement income is seen as one of the primary needs fulfilled by life insurance. However, most Indians postpone this need to their 40s and beyond.

While it is suggested to start planning for retirement right from the beginning of the career, life insurance offers solutions for late starters as well. And then, of course, with life insurance companies providing their expertise in managing both life expectancy risks as well as investment risks, the world over life insurers play an important role in providing annuities to the retiring population.
One of the most attractive features of life insurance is the ability to provide stable returns along with adequate risk cover and underlying income tax benefits. This is particularly true of traditional products. Multiple consumer research confirms that this is what the majority of Indian consumers are looking for.The overall products mix of the life insurance industry with its share of traditional products that stood at 93 per cent in FY14 is also a reflection of customer preferences.

In Union Budget 2015, the income tax benefit has been improved through initiatives such as increase in 80C limits from Rs 1 lakh to Rs 1.5 lakh, increased exemption up to Rs 2 lakh on interest on loans pertaining to self occupied house, and an increase in personal income tax slab from Rs 2 lakh to Rs 2.5 lakh. This change offers an opportunity to reduce the tax burden by investing in long-term savings through life insurance.

The advent of the new year is the time to start financial planning by clearly defining short-term and long-term financial goals. And for those who are already aware of their financial needs, it is time to review the financial status vis-à-vis financial needs and current assets and liabilities. Life insurance is not the solution for all your financial needs, but it is best suited for long-term savings for life stage needs, protection, and post retirement financial security. For shorter term, there are financial solutions to complement life insurance in your financial portfolio.

So as 2015 begins, it is time to build the habit of disciplined savings to ensure that small sacrifices today help you ensure bigger happiness for you and your loved ones in the future. For 2015, best wishes for a financially secure future.
(The writer is the CEO & MD  of Max Life Insurance)