Here's How You Can Insure Your Wealth!

Do you want to be wealthy? Obviously, who doesn’t? But it only makes sense if your wealth multiplies only stay in the family. In fact, the question most people long to ask is how to ensure that? While it may seem a far off priority to pass on sufficient wealth onto your children, Unit-linked Insurance Plans can help.

So, if you have a wealth goal, it’s not a destination you want to visit as a tourist, but as a resident. A lot of the wisdom is already there in traditional methods of saving, spending only on important needs, etc. Following this wisdom in modern times, however, will be a challenge.

But if you set your goal right, priorities will start to fall in order. Wealth goals are like that once you set your sights on it and create a practical and realistic plan for it. With a wealth goal, you have two objectives - Generate wealth and Preserve the wealth.

Both objectives need a slightly different approach. While generating wealth is a high-involvement activity, preservation should ideally be passive. Meaning, while you put a lot of effort into generating wealth, preservation should be almost automatic.

This is where wealth insurance plan comes into the picture.

What Does Insurance Mean for Wealth?

The word ‘insurance’ signifies preservation, and preservation ultimately leads to long-term prosperity or presence of wealth in the family. More specifically, wealth insurance will mean the safety of wealth from all of the following:

• Market performance: Equity markets are one of the simplest means of generating wealth. However, you should not lose your equity market gains once the markets turn sour. In other words, you should transfer your gains from equity (or any other high-risk) investments to safer assets like debt funds or liquid funds.
• Inflation: Inflation erodes the value of accumulated financial wealth over time. Protection from inflation will means that the wealth you have accumulated keeps earning an adequate interest to keep up with the inflation.
• Taxes: Taxes can hurt your nominal rate of interest on static wealth. In simpler terms, taxes will reduce the return on safe investments eroding its value. Thus, you will need a tax-efficient wealth insurance plan.
• Spending: Tackling unnecessary spending is easier than other challenges. Simply putting barriers to withdrawal would keep your money safe from petty expenses. For example, if you transfer the money into a savings account it is easiest to spend with debit cards or credit card. Instead, keep the large sum of money in funds which may take some time to release your withdrawal.
• The Untimely Demise of Investor: This is one of the bigger risks to wealth generation and preservation. Even though rare, death of the earning member can derail the wealth plan entirely. However, you have investment options which help you take care of this challenge as we will see.

ULIPs as Wealth Insurance Plan –

Unit linked insurance plans are unique and versatile investment option from life insurance companies. ULIPs provide you with dual benefits of wealth generation and preservation, due to their unique combination of insurance and investment options.

A ULIP investment plan can offer you all the options we have listed for wealth preservation. In fact, ULIP can fulfil both wealth generation and preservation goals for you.

How to Generate & Preserve Wealth With ULIPs?

ULIPs give you a tax-efficient avenue for investing in equity markets and ways to automate your portfolio management. Here are a few unique investment options which help you generate wealth and preserve it:

Securing Your Wealth from Early Death

With ULIP plan you can secure the premiums as well, which the insurer will fulfil in case of your early demise. The investments will continue as you planned even after your demise and your family will receive the accumulated money at the time of maturity.

Canara HSBC Life’s Invest 4G plan can cover your premiums in case of your death within the policy tenure. For example, if you committed to investing Rs. 2 lakhs a year for 30 years in the Invest 4G plan, and unfortunate pass away in the 15th year of the policy:

• Your family will receive the death benefit as per the conditions in the 15th year
• The policy will continue with all investments as it would have been if you were alive
• The family will receive the accumulated wealth at maturity

Thus, a ULIP plan like Invest 4G can fulfil all five of your wealth generation and preservation needs. The best part is that you can fulfil both objectives of your wealth goal without a continuous involvement in the plan.

Once you automate the investment and portfolio management you can simply focus on your family and profession. The plan will work in the background to generate returns and preserve them as per the decided strategy.

Tax-Efficiency of ULIPs

The money you invest in ULIPs helps you save tax under section 80C of the Income Tax Act. Any withdrawals and maturity proceeds from ULIPs are also exempt from tax. However, you will need to ensure that you don’t invest more than 10% of the life cover in a year.

For example, if your life cover in the ULIP is Rs. 30 lakh, you should not invest more than Rs. 300,000 in any policy year. If you do the additional investment will become taxable at the time of maturity.

Time is Essential

When it comes to wealth generation nothing is more important than time. It is the only factor you can control in the investment equation. Time compounds your wealth, the more time your money gets in the investment the more it compounds.

So, make sure to give your wealth goal as much time as possible unhindered for the best results.