It is said that money does not always bring happiness, yet it certainly brings peace of mind. Everyone desires to be secure about the future. We want to ensure that our loved ones will not face hardship if something were to happen to us. We also desire to be certain that we will not end up on the streets when we retire and no longer work. This is the reason why you require both a pension scheme and life cover.
These two instruments are two solid walls that safeguard your financial life. One wall looks after your loved ones when you are no longer there. The second wall looks after you when you become old and no longer work. Let us get to know why both are necessary and how they complement each other.
What Is Life Insurance?
Life insurance is a promise. You give a premium on either a monthly or a yearly basis. In return, an insurer promises to pay your loved ones a substantial amount if you pass away within the policy’s term.
Consider it to be an insurance. You might not be there to earn, but your family will still receive money. They can utilise this money on daily expenditures, school fees, rent, loans, or even grand plans like marriage or further studies.
In case you’re not here, your family may face sudden money problems. With life insurance, they get time and breathing space to live without fear.
What Is a Pension Plan?
A pension plan is similar to a salary in your old age. When you are working, you get money every month. But there will come a time when you retire. No more regular salary. If you don’t plan, you might rely on others or experience money worries.
A pension plan prevents you from having this issue. You invest money when you are working. When you are old and retired, the business returns money to you each month or each year. In this way, you still earn money even when you are not working.
Imagine a pension plan as your retirement salary. It makes you economically independent and allows you to live with respect when you are elderly.
Why Having Only One Is Not Sufficient
Some believe life insurance is sufficient. Others believe a pension plan is sufficient. But the reality is, both are essential.
If you have only life insurance, your loved ones will be secure in case you pass away at an early age. But when you retire and are still alive, you might have no regular income.
If you have a pension plan only, you might receive money after retirement. But in case anything happens to you before you retire, your family will be in trouble.
So, one secures your family when you are deceased. The other secures you when you are alive and no longer employed. Together, they provide total financial protection.
Advantages of Life Insurance
- Protection for Family – Your family will not experience sudden money issues.
- Debt Support – If loans are taken, life insurance assists the family in paying them.
- Peace of Mind – You remain tension-free knowing your loved ones are secure.
- Future Security – Education and marriage of children can be secured.
Advantages of a Pension Plan
- Regular Income After Retirement – You do not need to rely on children or kin.
- Medical Support – The cost of medicine increases with age. Pension income assists in managing them.
- Financial Independence – You live with dignity, without seeking assistance.
- Long-Term Planning – It makes you confident to spend your old age peacefully without tension.
How Pension Plan and Life Insurance Complement Each Other
Think of yourself constructing a house. You cannot construct it using a single wall. You require all sides to be protected. Similarly, for financial stability, you may need both a life insurance policy and a pension plan.
This is how they complement each other:
- When you’re working, life insurance secures your family in the event of a mishap.
- Meanwhile, your pension plan accumulates funds for you in the future.
- When you retire, life insurance might not be the primary requirement anymore, but your pension plan becomes active and generates income.
In this manner, you are secure at all stages of life.
A Simple Example
Let’s consider a case here of Ramesh. He is 30 years of age and holds an office job.
For Ramesh, there was the purchase of a 30-year term life insurance. In case anything happens to him within those years, his family will receive a large sum of money.
Ramesh also invests in a pension plan. When he retires at the age of 60, the pension plan begins paying him money each month. Both safeguard his entire life.
Myths about Life Insurance and Pension Plans
“I am too young to need these.” – The reality is that the sooner you begin, the less expensive and more effective the plans are.
“My savings are sufficient.” – Savings alone won’t last long, particularly in the face of rising prices. Insurance and pensions provide additional protection.
“These plans are complicated.” – Actually, they are straightforward once you learn the fundamentals. They are merely monthly investments for security later on.
“Only wealthy individuals require them.” – Anybody with dependents or future needs them. Even minimal contributions matter.
Steps to Select the Ideal Plan
- Check Your Needs – How much will your family cost if you are not around? How much will you require post-retirement?
- Compare Options – Compare various plans and find which one suits your budget.
- Start Early – The sooner you start, the less it will cost.
- Review Regularly – Once your income increases, you can add coverage or pension savings.
Final Thoughts
Life is full of surprises. There are some good ones, some difficult ones. But by smart planning, you can meet them head-on. That is why you must not decide between a pension plan and life insurance. Decide to have both.
One secures your family when you are not around. The other secures you when you are old. Both of them provide overall financial security. They make you enjoy today in peace and face tomorrow without fear.
