Financial planning - How much we truly understood about financial planning? Do we really understand the role of insurance, and how it fits into our financial plans?

Why the urgency for financial planning?
It is an essential process of meeting our life goals through proper management of our finances. Financial planning is necessary if we desire to improve our standard of living, decrease the probability of financial crises, protect our investments and loved ones, and accumulate wealth over time. To ensure that all these can be achieved, it is essential that we start financial planning early. And most would agree that there’s no better time to do it than now with a whole range of financial tools to choose from in the market.Click Here!

Despite increasing awareness of financial planning, many of us are still confused over the different financial planning tools available or how they work. We may tend to underestimate our financial needs and make poor investment choices.This highlights the urgency for public education on the different financial tools available in the market, and the management of personal finance to meet the needs at life’s various stages.

While banks and fund houses have traditionally been the ones to offer financial services, insurance companies have been quick to offer their products as a vital component in financial planning. Indeed, apart from the traditional insurance products that offer just protection, discerning and sophisticated consumers can also choose to buy investment-linked plans that offer protection as well as returns that are potentially higher than fixed deposits or savings.Click Here!

Protecting Your Assets and Loved Ones.
How then, should we go about choosing an insurance product? For the uninitiated, the variety of forms and configurations that insurance plans come in can really be confusing. With the help of a trained insurance/financial adviser to help you understand the main features of the different plan types, one can easily recognize the suitability of the various plans. Here is a brief introduction of the different types of insurance plans you can find in the market.

Traditional Life Insurance.
Traditional life insurance plans are designed to provide life protection and savings, and these plans in general make up the basic policies that first-time insurance buyers should consider. There are three different types of traditional life insurance plans: term, whole life, and endowment.

Term insurance provides temporary protection for a stipulated time period, and the sum assured will be paid to the beneficiary only in the event of death or, where applicable, upon total and permanent disability during this period.

Whole life plans provide coverage against major diseases, disability and death, and the policyholder will be paid any unclaimed amount in full when the policy matures. After a number of years, such plans acquire surrender value which can be cashed in should the need for permanent insurance protection cease or diminish. But do note that buying a life insurance policy is a long-term commitment. An early termination of the policy usually involves high costs and the surrender value payable may be less than the total premiums paid.

Endowment plans, popular as a savings plan, provide a combination of protection and savings for a stipulated period of time. The sum assured and bonuses, if any, are paid out if you die within this period. If you survive, the sum assured and bonuses are paid to you. Endowment plans are popular for those who are generally risk averse and seek protection while saving for retirement or for their children’s higher education. While saving with regular premiums, you will also enjoy the benefit of an insurance cover to provide your family with financial protection.

Investment-Linked Insurance.
 Such plans combine the benefits of both insurance protection and profits from investment in professionally managed funds. Fairly similar in concept to unit trusts, some investment-linked plans give you the flexibility of choosing and adjusting the investment-protection ratio according to your investment/protection needs at each stage of your life. Investment-linked plans offer both life insurance coverage and potentially greater financial growth.

Annuities.
It is never too late to seek financial advice and invest in the right plan for your needs. Most insurance companies have various plans that specifically cater for people who would like to prepare for their retirement. Annuities are an example of retirement planning products that are designed to provide a regular retirement income to retirees for as long as they live. This is usually in return for a stipulated sum paid by the annuitant to the insurer. Apart from cash, you can choose to invest using your CPF Minimum Sum.

Home Protection Insurance and Travel Insurance are also commonly offered today. Home insurance provides coverage for loss or damages to policyholders’ homes, furniture and personal valuables, while travel policies provide protection for policyholders’ travel around the world, and their holiday activities.

Mortgage insurance offers homeowners and their dependants the peace of mind of settling a housing loan in full should anything untoward befall on them.

It’s Never Too Late to Start.
For those who have not thought about planning for your future or retirement, it is not too late to start now. Planning ahead will ensure you enjoy financial security and peace of mind later in life. Backed by a sound understanding of the different financial planning tools in the market, and an early proper financial plan, money will be the least of your worries by the time you retire. Take action before its too late. Click Here!