Life insurance of India is a one-of-a-kind financial product that can help you achieve a variety of financial goals. It can be used to provide financial security for your loved ones and dependents, as a secondary source of income during retirement, and build a corpus for the child’s future higher education and marriage. In addition, life cover insurance can be used as a tax-advantaged legacy tool to transfer wealth from one generation to the next.
Importance Of Having A Life Insurance in India
Purchasing life insurance of India is one of the most important financial decisions you can make, but believe it or not, only 10% of Indians are covered. But why is it so crucial? Nobody knows what the future holds, no matter how much money you make. Many people die prematurely each year due to illness or accidents. Suppose you are the sole breadwinner in the family. In that case, your death could have devastating consequences for your loved ones—their ability to pay household expenses, debts and maintain their standard of living. The very least you can do is secure your family’s financial future by purchasing life cover insurance. By selecting the right policy, you can achieve several financial objectives as the policyholder. Here are a few reasons why insurance is essential in your life if you live in a country like India:
Various insurance policies, such as Unit Linked Insurance Plans (ULIPs) and other life insurance plans, allow for the combination of investment and coverage within a single plan. The value of insurance in life is evident because it can help with wealth creation. Along with saving and building a corpus for future needs, multiplying wealth is a desirable benefit for many policyholders.
2. Clearing Debts
In the unfortunate event of the policyholder’s untimely death, the family members may face a significant financial burden due to outstanding loan payments. Debt payments will only add to their anxiety during an emotionally difficult time. The significance of insurance in life is enhanced by the fact that it can assist in dealing with such debts.
3. Fulfilling Long-Term Goals
It is critical to recognise the significance of insurance in achieving long-term life goals. You don’t want your loved ones to give up on their dreams while you’re gone. If you choose wisely, the payout from an insurance policy can cover significant expenses such as higher education or marriage. Remember to consider the importance of insurance in meeting various parameters or goals when calculating the coverage amount.
4. Achieve Retirement Goals
Retirement planning is a crucial component of a sound financial plan. You may be unaware of the significance of insurance in developing a comprehensive retirement plan, but it can be highly beneficial. Specific insurance policies can provide a steady source of income after retirement. The role of insurance in one’s life after retirement is determined by how one invests in the present.
5. Tax Benefits
When you work hard for your money, you want to save as much of it as you can. The value of insurance extends beyond providing relief from current expenses. Insurance policies are one of the financial instruments that are tax-exempt under the Income Tax Act of 1961. Tax benefits are subject to change due to changes in tax laws.
6. Peaceful Life
If you are constantly concerned about managing your income to meet your expenses, it significantly disrupts your peace of mind. Financial difficulties can even lead to serious health problems for some people. Insurance is critical in preserving your peace of mind.
Benefits Of Life Insurance
Insurance policies provide additional benefits in addition to life cover insurance, which is the primary purpose of insurance. The value of insurance in your life extends beyond financial protection in the event of a catastrophic event. There are a variety of insurance policies available with varying benefits that are best suited to your needs.
1. Life Risk Cover
Life insurance provides a high level of protection for you and your family in the event of an unfortunate event.
2. Death Benefit
Investing in life cover insurance ensures a secure future for you and your family. If something untoward occurs to the insured, the insurer pays the entire amount, i.e. the sum assured plus the bonus, to the bereaved family. Life insurance of India also protects the interests of people whose incomes are decreasing as they age, people who are involved in accidents, and retirees. There are numerous policies available, and you can select the policy that best meets your needs.
3. Return on Investment
When compared to other investment options, life insurance schemes outperform. The majority of life insurance schemes provide bonuses that no other investment scheme can provide. The money invested in life insurance of India is secure and protects against risks. The money invested will earn good returns and be returned in full as a sum assured either at the end of the term or upon the insured’s death. The money invested and the returns are safely repaid in both cases.
4. Tax Benefits
Section 80C of the Income Tax Act is an efficient way for salaried individuals to reduce their tax liability. Investments in the specified instruments are eligible for a rebate under this section. The current rebate amount under section 80C is Rs. 100,000, which can be invested in life cover insurance premiums, pension superannuation funds, employee provident funds, equity-linked mutual fund schemes, National Savings Certificates, and public provident funds (maximum Rs 70,000). The amount invested in these instruments is deductible from gross taxable income and thus eligible for a rebate.
5. Loan Options
If you have life insurance, you can take out a policy loan if you are in desperate need of money. Depending on the policy provisions, the loan amount can be taken as a percentage of the cash value or sum assured under the policy.
6. Life Stage Planning
Life insurance assists you in life stage planning, allowing you to plan your financial goals for the rest of your life at your leisure. It helps you in planning for your life stage requirements. Life cover insurance not only provides financial assistance in the event of untimely death but also serves as a long-term investment. Depending on your life stage and risk tolerance, you can achieve your goals, whether they are for your children’s education, marriage, building your dream home, or planning a relaxed retired life.
Wrapping It Up
Many investment options are readily available in the financial market. Still, if purchased at a young age, life insurance of India provides numerous benefits such as offering protection to your family in your absence, planning your retirement, adding financial security, and assisting in tax savings. The most important thing is to select the best life cover insurance policy for your budget and needs. Make sure that before you close on one policy you gather a few life insurance quotes and take a good look at them. Your needs, family situation, and life goals will change over time. When this occurs, it is time to re-evaluate the appropriate type of insurance for you to ensure you are adequately covered.