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Irrespective of the nature of the plan, it is well known that a financial plan will work only in the event of a realistic goal being set. It needs to be ensured that the financial plan should involve various factors such as type, tenure, affordability and purpose of choosing the investment plan. Among the many investment options available in the market, pure protection plans and insurance based investment plans are the most vital and beneficial option.
In India, pure protection plan basically refers to term plan that indemnify a person in case of untimely demise of the Insured person during the term of the policy. A term plan provides the amount of sum Assured to the Beneficiary or nominee declared by the insured person/policyholder at the inception of the policy. Term plan acts as a financial tool and secure the family of the insured person from financial crunch or loss which may be caused due to death of the breadwinner. Following factors needs to be thoroughly analyzed in order to decide the amount of Sum Assured that will compensate the dependents of the Policyholder after his absence.
As far as insurance based investment plans are concerned, one may choose among traditional plans or unit linked insurance plan. Traditional plans comprise endowment plans, Pension plans or money back plans. Depending upon your financial needs whether short term or long term you can choose any of these traditional plans. Under these plans, you get guaranteed returns along with insurance cover.
Unit linked insurance plan is another option which you can opt for short span of time say 5 year or 10 year. Along with insurance cover these plan offer comparatively higher returns but the Risk factor is higher as these plans are market linked.
Whether you wish to choose a long term or a short term financial plan, it is important that you set realistic goals to the need. For instance, funding your child’s education and retirement are two different goals, yet require a great deal of time to achieve and a bit of investment too.
So, depending on your present earning potential and the needs for the interim and the long run, it is important that you decide on the goals for short term plan as well as a long term financial plan.