Is life insurance a good investment?

Different life goals require different protection needs. You may think it's not necessary to spend money on life insurance because of your age or because you haven’t started a family yet. You may even feel you don't need life insurance at all.

But is that really true? 

You're young, healthy and optimistic about the future. Fantastic! But here's the thing: unexpected events and accidents could happen to anyone at any time. 

This is where a life insurance policy comes in. This is a contract between you and the insurer to pay a lump sum to the policy's beneficiary upon your death. Some term plans may also offer optional covers such as accidental death and critical illness.

Life insurance prepares you for the future by taking the stress of the unexpected off your shoulders and minimising the possibility of financial burden on your family as well. An accident could affect your ability to work. Without an income stream and the right insurance coverage in place, you and your family's quality of life could suffer.

Even if you're not the main income earner of the family, being unable to work could negatively impact your overall household income. Taking care of the house, preparing meals, childcare – that's all value you bring to the family.

Your premiums will depend on the type of life insurance you choose, and the amount of cover you want. There are many types of life insurance plans available, including term life (with or without maturity benefits); whole of life; retirement plans; and Unit-Linked Insurance Plans (ULIP).

Term insurance is one of the most popular insurance plans in India. It can be taken out for a set amount of time (10, 20, 30 years or more). It's also one of the least expensive insurance schemes to choose from.

An online premiums calculator can give you a good idea of what you would pay, based on your gender, age, policy term and frequency of payments.

Additionally, when you're deciding on life insurance, your first consideration should be how much protection coverage you'll need – not how much you'd want to pay. An insurance adviser can work with you to customise a coverage plan that suits your current life stage, budget and ultimate life goals.  

With term life policies, there are certain factors that can determine the premiums. These include your:

Female customers may even get special discounts on premiums. Generally, the younger you are, the lower the premiums you'll have to pay, so it's better to get insurance coverage while you're still young. And instead of making monthly instalments, you could choose the annual premium option. Usually, the total premium you would have to pay will be lower.

First, it's always a good idea to manage your risk by diversifying your investment portfolio. Some coverage policies may offer cash bonuses and dividends, which can be a good way to balance out risk exposure and diversify your investment portfolio.

Second, relying only on investments may not be enough to generate a stable income for you and your family. When it comes to investing, a higher yield usually means higher risk. If you pass away without protection from a life insurance policy, the absence of a stable income stream might put your family in financial jeopardy.

It's important to pay attention to the scope of coverage and exclusions in your policy provisions.

There are usually 2 types of life insurance claims:

The policyholder or beneficiary must carry out the claim settlement process. Please note that HSBC is a corporate agent and not an insurer. If you've taken out a policy through us, you can reach out to your Relationship Manager or go to the nearest HSBC India branch, where we can connect you with the insurance company for claim processing. 

If you've just started your career, it's normal to be focusing on your job and getting ahead. But it's equally important not to forget to plan for your future. The right coverage can protect you from life's unexpected events.