Financial planning entails an objective assessment of your income and your expenditure to figure out a way to maximize your savings and investments. It allows you to reach your financial goals and objectives quicker without any hassles whatsoever. A financial plan brings method to the madness and streamlines your finances.

To be able to provide the best results, a financial plan should ideally focus on three aspects – savings, investment (wealth creation), and protection. Most investors tend to focus only on the savings and investment aspects when drawing up a financial plan, leaving out the protection aspect entirely. This can end up disrupting the carefully thought-out financial plan in the long-run. Here’s a look at why insurance occupies a very important role in a financial plan. 

The relevance of insurance in a financial plan

Most investors treat insurance unfairly, as an afterthought. Insurance can help you or your family get back on your feet after an untoward incident. The payment that an insurer gives you upon the happening of an undesired event can help you tide over losses arising out of it.

For instance, assume that you’ve worked out an exceptionally good financial plan including a careful selection of low-risk and high-return savings and investment options. Your ultimate end goal is to purchase a dream home for your family and to save up for retirement. If something were to happen to you, such as an accident, a disability, or even death, it can throw your entire plan up for a toss. In addition to that, your family would also end up losing their primary source of income, thereby putting them under great financial distress.

An insurance plan can avoid all of this worry. It can keep you and your family protected from such situations by acting as a major source of income during such trying times. Such is the relevance and importance of insurance in a financial plan.

Additional Read: All You Need to Know about Different Types of Insurance and Their Uses

Insurance - An investment option

Why should you include insurance in your financial plan?

Now that you’ve understood the relevance of insurance in a financial plan, let’s take a look at some of the reasons why you should include this product in your plan right away.

Insurance can also act as an investment option

While insurance plans are designed to offer you protection against losses and other untoward incidents, they can also act as an investment option. Unit Linked Insurance Plans (ULIPs) in addition to providing a protective cover also gives you handsome returns on your investment. Insurance plans with endowment benefits can also be a good option for investors looking to get something out of their investment, while staying indemnified from losses.

Insurance can help you meet debt obligations

Even when you lose the ability to generate income due to an adverse event, your debt burden still remains intact. Without an income source, it might become tough for you to pay off your obligations on time. Insurance comes to your aid under such a situation. The payout you receive from the insurer can be used to settle your debt obligations without causing any significant financial distress to you or your family.

Insurance can help you save tax

The tax saving aspect of insurance is a major reason why you should include it in your financial plan. The premiums that you pay towards an insurance plan can be deducted from your total taxable income, thereby reducing your tax liability. Also, the payouts that you receive from an insurance policy are also eligible for tax deductions under section 10(10D) of the Income Tax Act, 1961.   


Knowing how relevant insurance is, it’s best to purchase life and health insurance plans as early as you can. This is because the premiums for these kinds of insurance generally increase as you age. Aside from these types of insurance, it’s also a good idea to invest in motor insurance and home insurance if you own a vehicle or a house.

Additional Read: What is Home loan insurance? Is it necessary for you?

Before you buy insurance, it is always a good idea to compare the various plans available. Comparing and availing insurance is also now easier than ever, thanks to the Moneyfy app offered by Tata Capital. With this app, you can easily browse through various kinds of insurance plans and purchase the kind of covers that are relevant to your specific needs. So, to make your insurance purchases smooth and seamless, download the Moneyfy app from Tata Capital and make your financial journey easier.

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