Why financial planning is important?
Planning in advance for anything leaves you with a less margin for error on any errand or responsibility. Similarly, planning your insurance at an early age reaps you more benefits later in your life. We often find ourselves so caught up with our expenses today that most of us procrastinate and leave ‘saving for retirement’ as a responsibility for tomorrow. However, with experience we come to learn the importance of planning things out earlier and the advantages that it bears.
Today’s economic challenges have compelled adults to instill financial knowledge in children from an early age. This equips children to face financial challenges later in life. One important aspect of financial planning involves insurance planning. Insurance plans are important as they cover our retirement expenditure.
Opting for an early insurance
To logically analyze the importance of planning your insurance cover at an early age, let’s consider an example. For instance, a person aged 40 can buy a life insurance policy through which he receives Rs.50, 00,000 as insurance cover on retirement, provided he pays a premium of Rs.50, 000 annually till the time he is 60 years old. However, he can also start paying the premium or buy the plan after 10 years wherein his premium would be Rs.1, 00,000 per annum (from the time he turns 50 till he turns 60). Most of us would be enticed to choose the latter option and buy it at the age of 50. Considering that even he did the same, the person devalued the cash he used to pay the premium. This is because the money collected is accrued with tax-deferred cash which benefits the policyholder by increasing his cash value over time.
Increased cash value puts you in a stronger financial position. As such if you decide to procrastinate and pay later because you’d end up paying the same amount, then you deprive yourself of benefits which you could make use of. One such benefit would include the availability of loans. Each premium payment builds your cash value and over a long period makes you financially stronger. This for example, makes you accessible to private loans, home loans, automobile loans, etc. which you might not be granted if you delay your premium payments.
Today, institutions offer a wide array of insurance policies. Compare and choose the one that best suits your requirements and circumstances.