​Deciphering VRS full form and its role in life insurance planning

One effective tool is the Voluntary Retirement Scheme (VRS) which gives a chance to the employees of public enterprises for an earlier retirement. In most instances, VRS is referred to as the 'Golden Handshake', and it has been increasingly selected by many individuals as it offers various advantages. Making use of the VRS becomes a part of the strategic plan for individuals who have already started to think about their retirement and financial future.

Here are 4 compelling reasons to opt for VRS

∙ Financial stability in the form of a lump sum payment: You must be aware that VRS full form is a Voluntary Retirement Scheme that provides a hefty lump sum amount. This amount can play a vital role in being a firm financial foundation which will help to meet your current and upcoming financial needs. It also acts as a safety net for situations like unexpected financial emergencies, thus ensuring financial stability.

∙ Reduced stress and improved quality of life due to early retirement: Retirement is often accompanied by a big decrease in professional stress and strain. VRS gives you the privilege of retiring early and leads to a less stressful life by choosing it. The positive outcomes result from better mental and physical health that contributes to the improved quality of life.

∙ Opportunity to pursue passions and interests with ample free time: VRS makes it possible for you to retire young, which gives you a chance to indulge in the hobbies and interests that you could not do during the time you were working. Whether you spend your extra time on hobbies, travel, or volunteering, you can use that time to add meaning to your life.

∙ Chance to start a second career or own business with the financial cushion: The lump sum received through VRS can be considered as capital to launch a new career venture or set up a business. With this, you can open a new horizon and use your expertise and capacities in a different direction.

Role of VRS in life insurance planning

∙ Lump-amount payment: The large lump amount obtained through VRS acts as a financial buffer that can be invested in life insurance products. These plans provide a safety net for your family, protecting their financial security during your absence.

∙ Planning for retirement: VRS is a planned step towards retirement. VRS benefits can be systematically invested in life insurance company pension schemes. These pension plans give a consistent stream of income throughout retirement, allowing you to live comfortably.

∙ Financial security: Life insurance plans provide financial security for the policyholder's family in the case of their untimely death. The money acquired from VRS may be utilised to pay the premiums for such plans, safeguarding your family's financial future.

∙ Tax benefits: The premiums paid for life insurance plans are tax deductible under Section 80C of the Income Tax Act. This helps to manage the tax burden on VRS benefits, resulting in tax efficiency for your retirement fund.

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Risk cover: The lump amount obtained from VRS can be used to purchase term insurance policies that offer high-risk coverage at a cheap rate. This guarantees that your family is financially covered in the event of an unanticipated incident.

∙ Future investment: VRS funds can be invested in Unit Linked Insurance Plans. ULIPs provide a combined advantage of insurance and investing, allowing you to develop a substantial corpus for the future while also providing life insurance.

∙ Covering medical expenses: Medical bills can quickly increase. VRS funds can be used to purchase health insurance or critical illness plans offered by life insurance firms, which cover hospitalisation or the treatment of major diseases.

∙ Ensuring a child's future: The money obtained from VRS can be invested in child plans provided by life insurance firms. These plans guarantee that your child's educational and future requirements are met even when you are not present.

∙ Wealth creation: VRS benefits can be invested in endowment plans that mix insurance and savings. These plans mature after a set length of time, resulting in a lump payment that may be used to build wealth.

∙ Loan facility: Individuals can enjoy loans against their life insurance policies by investing VRS accruals in the same. Such tools can be particularly relevant in case of financial crises when you can stay afloat without using your savings.

∙ Regular income: Some life insurance policies have annuity features that allow one to receive payments in the form of a constant income. Your VRS money can be invested in such plans. This way, you can have a settled income post-retirement which will help in maintaining your lifestyle.

∙ Long-term goals: The caveat to VRS benefits is that they are used to purchase life insurance plans that are tailored towards achieving long-term financial goals. Such objectives could be the child’s education, marriage, purchasing a house, or investing for a decent retirement.

∙ Flexibility: The VRS lump sum allows you to select the appropriate life insurance plan types thereof meet your personal needs and financial goals. You are given the liberty to choose the plan that better fits your risk appetite and anticipated returns.

∙ Estate planning: Life insurance would be an indispensable part of estate planning. VRS money can be soundly invested in life insurance that provides for a smooth inheritance tax avoidance to the next generation, and in the process, provides for the financial security of the heirs.

∙ Peace of mind: Through life insurance backing, you get peace of mind knowing that your family members will be well looked after financially. This decision enables you to be 100% sure your dear ones are taken care of, which means you can be worry-free and focus on enjoying your well-deserved retirement.

As a conclusion, the combination of VRS can greatly enhance your financial planning portfolio. It does so by creating a safety net which you can utilise to obtain life insurance, thus, ensuring you have a safe and comfortable retirement. Given this, VRS needs to be taken into account as an essential component of your life insurance planning.