Several individuals choose insurance products only for saving taxes at times. This may often seem like a very convenient and practical thing to do. However, there are two things that often get missed out in these situations. Firstly, the coverage taken may be inadequate while secondly, the returns may not be up to the mark over the long-term. One should always have a clear understanding of the coverage based requirements.
Firstly, health or life insurance must offer ample protection from any financial troubles. You should have a clear understanding of the quantum of life insurance that your family actually requires in case of an untimely mishap. The coverage should stretch to at least 10-20 times of your present annual income and this will help you repay home loans while taking care of the education of your children and ensuring that your spouse gets a certain income as well. Health insurance should be adequate for taking care of treatment or hospitalization costs.
You should also maintain the insurance coverage that you opt for. Many people often exit their insurance policies once they save on taxes. This should be avoided since the presence of an insurance cover offers financial security. Maintaining insurance coverage should be a long-term goal and this is something that should be maintained. You should not look for just saving on taxes. You should also look to invest for long-term creation of wealth and achievement of specific goals. For getting more out of your money, separately invest in other options like mutual funds and so on. Do not just invest in endowment based insurance plans or ULIPs. You should start SIPs with funds that have good ratings and increase your contributions steadily throughout the year.
Get hold of a good term insurance plan at the outset. These are a must when it comes to taking care of dependents. You will have lower premiums to pay and the life insurance coverage can also be larger in comparison to other insurance solutions. Since you will have lower costs in terms of premium, you can tap your savings for investing in more attractive avenues like ELSS funds and the like.