Independence Day 2024: 5 reasons life insurance is your secret to a golden retirement

India, in its majestic march towards progress, is witnessing a profound transformation. A few societal evolutions are at play. The beloved traditional Indian joint family, where care for the elderly was a shared responsibility, is undergoing notable structural change. India's economic transition from an agrarian to an industrial and service-based economy has spurred rapid urbanisation.

This demographic change has created a trend towards nuclear families and a burgeoning middle class with big aspirations. As a result, contemporary Indians are increasingly establishing independent lives. This newfound autonomy, while exhilarating, necessitates a parallel evolution in long-term financial planning.

Increasing life expectancy and rising healthcare costs have been making post-retirement planning a necessity. In the realm of retirement planning, life insurance serves as a versatile financial tool offering a spectrum of solutions.

Here are five reasons you must make life insurance a part of your retirement planning strategy.

Securing post-retirement income

You may no longer have your primary source of income after you retire. However, a life insurance policy that offers income benefits can effectively replace your income. Many life insurance plans like endowment policies and even Unit Linked Insurance Plans (ULIPs) give you the freedom to receive your maturity payouts as regular income payments instead of a lump sum payout. Moreover, annuity plans also offer regular pension payouts that can add to your post-retirement income.

Coverage for medical expenses

As you age, the likelihood of developing some severe health conditions like cancer, stroke, or heart disease may rise. These critical illnesses often require expensive treatments, surgeries, and long-term care, which can be financially overwhelming. A life insurance plan with a critical illness rider provides coverage specifically for such conditions, on payment of additional nominal premium, ensuring you receive the best possible treatment without the burden of out-of-pocket expenses. This protection allows you to focus on recovery rather than worrying about the financial impact of your illness.

Paying off any remaining debts

If you apply for credit facilities like a home loan during the latter part of your career, some of these debts may carry over into your post-retirement life. While you could always continue to repay the loans out of your post-retirement income, it could also be a good idea to foreclose the debts. The maturity benefits paid out from a life insurance policy can be instrumental in helping you foreclose any debts you do not want to service over the long term.

Protection against rising expenses

Rising expenses may erode your purchasing power over time. To build an inflation-proof retirement corpus, you need more than just savings; you need to invest and grow your capital. Life insurance plans like Unit Linked Insurance Policies (ULIPs) offer the opportunity to invest in a wide range of market-linked ULIPs. If the market moves favourably, these investments can grow multifold, thereby making your post-retirement life comfortable.

Ensuring liquidity of your estate

You may have other assets in your name as a part of your retirement corpus and your overall estate. They could include land, house properties and other immovable assets. Liquidating these assets could be time-consuming. On the other hand, the payouts from a life insurance plan are highly liquid and can be tax efficient.

For these key reasons, life insurance can be a key element in financially securing your post-retirement life. If you haven’t already considered including life insurance in your retirement planning strategy, Independence Day is a good start to planning for your financial independence for the future.

Sameer Joshi, Chief Agency Officer, Bajaj Allianz Life