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3 Ways You Can Build Wealth with Life Insurance

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August 04, 2021

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Have you ever tried to invest your money? If you’ve read about it or asked anybody for advice, they may tell you to focus on wealth creation. Sadly, nobody bothers to answer the question, what do you mean by wealth? Wealth is not the same for everybody. While some may want large sums in the bank, others may save their wealth as precious metals. Some people think of wealth as real estate while others think of it as fixed deposits. Before we learn more about how to build wealth, let’s take a closer look at what the term means.

What Do You Mean By Wealth?

All the above statements about wealth are true. People view wealth from their perspective, so it means something different to each individual. A good way to define wealth is having enough assets and funds to fulfil your needs, goals and future aspirations. Individuals who are considered richbut cannot meet their personal financial goals should not be called wealthy. And, even if you aren’t wealthy today, you can make smart choices that will help you in the future.

How to Build Wealth?

If you’d like to grow your wealth to meet all your financial goals, you need to have a plan. You cannot simply put your money in funds or other market instruments and forget about it. You need to be vigilant and follow market trends. You also need to protect yourself and your loved ones from potential financial losses or blows. Here are some important steps that will help you build your money over time:

1. Start Saving

Wealth creation relies heavily on investments. But, before you start investing, you need to grow your savings. A good rule of thumb is to put away at least 10% of your monthly income in a separate account. The account should be separate from your regular savings account and your emergency fund. Once you build up enough savings, invest all the money and then start again.

2. Plan for Emergencies

Something as small as a car accident could put you in hospital for a few weeks. Medical and car repair bills will pile up and you might find yourself scrambling to get your money in order. In life, you should always plan your finances for the worst possible outcome. Put a portion of your monthly income into an emergency fund that you can dip into in such scenarios. You should also purchase health and life insurance as a financial safety net. A good health policy will help take care of rising healthcare costs. Your life policy, on the other hand, will give your family members some financial stability when they need it the most. Remember to get life cover that is at least 10 to 15 times your current annual income.

3. Find Investment Avenues that Work for You

When it comes to investing, you should never rely on only one kind of financial instrument. Minimise your risk by finding multiple tools to help you meet various financial goals. Let’s say you’d like to purchase a car in 3 years and a home in 15 years. The car is a short-term goal. You could rely on safe investments like fixed deposits or debt funds to build money. On the other hand, buying a house is a long-term goal that requires substantial funds. So, you should look at putting your money in Unit-Linked Insurance Plans (ULIPs) or other tax-saving investments.

4. Plan for Your Retirement

People often get so caught up with immediate goals that they forget about their golden years. You must have a dedicated retirement plan separate from your other savings and investments. Ideally, invest your money in more than one retirement plan. For example, you can put money away in the NPS or EPF every year and purchase a ULIP Pension plan. Given today’s rate of inflation, you’ll need the extra money to maintain your standard of living once you retire.

5. Review Often

While learning how to build wealth, you must remember to balance your portfolio regularly. Every six months, take stock of your investments. If they are underperforming, think about moving your money around. When your investments are doing well, make sure you put in more money to reap higher rewards.

Life Insurance and Building Wealth

As you can see, life insurance must be a part of your wealth-building plan. With a good policy, you can save for the future, invest your money in goal-oriented instruments and protect your family from financial uncertainty. While a regular term life plan provides life cover and minimal returns, a ULIP can help you grow your money exponentially. With the right mix of insurance and investment, you can meet all your financial goals with ease.

 

Purchasing a term plan is quick and easy for everybody, but especially for working women. Make sure you shop around and compare policies before buying the best one for your family’s future.Show Full Article
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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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