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Get Freedom From all your Financial Worries on This Independence Day

dateKnowledge Centre Team dateAugust 10, 2021 views334 Views
Financial Independence | Financial

As August 15th approaches, how about having your very own Independence Day celebration this year? To be more specific, we mean your Financial Independence Day. While money cannot buy everything in life, financial independence is a valuable asset that few people possess. So, how do you acquire financial independence? Is it true that earning a fortune equates to financial independence?

If that's the case, why do we frequently read about high-paid athletes, actors, models, and other celebrities becoming bankrupt once they've passed their prime, despite having made a lot of money during their heyday? Why is it that even a middle-class man can sometimes handle his financial emergencies better than the majority of his upper-class people?

The solution is simple: individuals who grasp the difference between income and wealth, as well as how to develop it, are financially self-sufficient.

Six steps at achieving your financial independence this year

Step 1: Investment

Begin by putting down a portion of your salary by reducing your discretionary spending. It can be accomplished by resolving to invest at least 20% to 25% of your salary. The more money you save today, the more money you'll have later. Compounding is a powerful tool that should not be overlooked. Simply calculate the gain you'll receive on 20% to 25% of your salary if you save regularly and invest wisely! Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide range of Savings plans that customers can choose to secure their future.

Step 2: Incorporate some equity into your financial portfolio

When compared to other investment options, equity investments have rewarded investors by multiplying their money in a very short period. One can attempt to acquire sufficient money by starting early, planning effectively, and investing attentively, allowing him or her to reach financial freedom at a young age.



Step 3: Take the SIP path

If someone is unable to make lump-sum investing, periodic equities investing can help an individual build wealth to fund his or her retirement benefits. The SIP option has allowed investors to bring much-needed consistency to their investment strategy while also allowing compounded assets to operate to their advantage.

If you invest Rs 1,000 monthly in an equities mutual fund with an annual return of around 12%, you will have a capital of Rs 35.3 lakh at the end of 30 years! If someone has a sizable capital to spend post-retirement and requires a consistent source of income, one can engage in stocks and schedule a methodical withdrawal.

Step 4: Make a plan to achieve your objectives

Have a separate investment strategy for each of your goals (marriage, health, school), quantify them, and define a time horizon for each. You should conduct a study and provide sufficient time to make informed decisions; do not follow the herd and devote time and effort to learning the essentials.

Prepare a change-of-scenario action schedule and work it throughout the investment horizon. It will assist you in avoiding hasty decisions. Don't be persuaded by short-term anomalies' enthusiasm or dread. When the markets are unstable, don't panic if your investing horizon is long.

Step 5: Take control of the situation

Have enough cash on hand to deal with any emergency. Determine your emergency fund needs and work towards collecting them. The notion is that any contingency that anyone can confront at any moment in their lives, such as health concerns, job loss, or physical asset repair and restoration, should not derail your financial objectives.

Step 6: Keep records of your money and evaluate it

Even though short-term volatility is unavoidable, you should concentrate on the fundamentals of your invested equities. Keep your investing plan on track once you've devised it. Examine your portfolio from the perspective of the rationale that guided your investment.

Don't be too set in your ways only because you put in the time and energy for your past research; maintain the flexibility to adjust your portfolio as the fundamentals alter. Keep in mind that overconfidence might be dangerous to your finances.

Best investment plans to achieve financial independence

The first stage in financial investments is to choose the best investment for your background and requirements. Investment planning entails carefully selecting investments after conducting enough research and avoiding quick-money schemes that promise big returns in a short period.

Here are the top 5 investment plans to consider

1. Public Provident Fund (PPF)

PPF is among the most prominent modest savings schemes in India, and it is traditionally regarded as one of the best and safest investment options. In a fiscal year, PPF account holders can deposit up to Rs 1.5 lakh, with a minimum contribution of Rs 500. Section 80C of the Income Tax Act allows you to deduct PPF contributions from your taxable income.

2. Mutual Funds

Mutual fund dealers let you evaluate funds based on a variety of criteria, including risk, return, and pricing. Furthermore, because the data is readily available, the investor will be able to make informed selections. Mutual funds also provide advantages in terms of liquidity and expert management.

3. ULIPs (Unit Linked Insurance Plans)

ULIPs give a variety of advantages, including the ability to invest and insure at the same time. ULIPs are one of India's most popular investment vehicles, thanks to their tax advantages.

4. National Pension Scheme

It is a government-sponsored pension plan for employees from all sectors of the Indian economy, with plans based on equity debt, corporate debt, and government bonds. NPS requires a minimum payment of Rs 6,000 per year, with no higher limit.

5. Direct Equity

You can save money on royalties and marketing costs with direct plans. This modest sum is put into the plan, and it may help you earn additional returns over time.

Being financially self-sufficient takes time, but so has every other freedom movement in history. A whole-hearted dedication to money management will help you attain financial independence. Participate in this freedom fight to make your life financially worry-free and independent of forces beyond your control. Give your family a track record of financial independence.

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Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance plan. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Life insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age: It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chance of contracting diseases is low. Young people also opt for the best life insurance policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender: The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits: The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term: Policy terms are also taken into consideration by insurers while deciding the premium amount. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation: The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term, the beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Star Term Plan also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy a life insurance plan in your early 20s because it is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy the best life insurance plan at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why life insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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