While planning for personal finance, insurance plays a critical role as it helps cover the risk.
An insurance policy is a risk protection plan and seeks to secure your loved ones in your absence.
Of all the insurance policies that are offered by a multitude of companies these days, life insurance continues to hold a critical spot. However, the penetration of life insurance in India remains sub-optimal with only one-tenth of the population insured.
In this article, we seek to discuss why life insurance is considered as a smart investment despite not providing any returns when compared with new age-financial products.
Irrespective of your salary or your network, you don’t know what is in store for you tomorrow.
In India, the death rate is estimated to be somewhere around 7-9/1000 which translates to over 25000 deaths every day.
Humongous number, isn’t it?
Well of this, many people die prematurely due to any disease, or accident or naturally. Also, many are the single bread earners of their family.
What happens to their family from now on?
This situation could have devastating consequences, and their ability to pay for household expenses (leaving aside other liabilities) goes for a toss.
Life comes to a standstill. Leave alone maintaining the standard of living; these people struggle even to lead a life with basic necessities.
This situation is where an insurance policy helps.
We believe this is the least an individual should do for his/her family.
Ten Reasons to Buy a Life Insurance Policy
1.Safety Net for Your Loved Ones
This remains the most important reason for buying an insurance.
Remember, your family is dependent on you and thus when you are gone, you do not want them to suffer.
You can make up for it either by replacing lost income or planning your child’s education/marriage or by even ensuring that your spouse gets the much-needed financial security.
2. Dealing with Financial Liabilities
In your absence, you do not want your family to deal with financial obligations such as housing loan, auto loan, personal loan, etc. These liabilities are taken care of, if you purchase the right life insurance policy.
3.Achieve Long-Term Goal
There are insurance policies that provide you with some modest capital appreciation while providing risk coverage.
Thus, these policies also help in achieving your goal as you tend to remain invested for the long-term.
4. A Supplement for Retirement Goals
Often, life insurance policies are considered to supplement your retirement goals.
With some life insurance policies, you can get a regular stream of income every month. Thus, these policies help you manage your monthly expenses even after retirement.
5. Subscribing to Insurance at an Early Age is Cheaper
If you subscribe to life insurance policy at an early age, the premium amount is on a lower side.
It is advisable to conduct proper due diligence before accepting an insurance policy to ensure the suitability of the product.
6. Business Needs Can be Taken Care
Life insurance is not only for an individual and his/her family. Some policies safeguard your business too whereby the nominees of the deceased business partner receives the amount from the existing partner instead of the stake.
7. Provides Tax Benefits
Insurance policies provide tax benefits under section 80C of the Income Tax Act.
An individual subscribing to the policy is eligible for a maximum tax benefit of Rs 1.5 lakhs. This makes it extremely attractive for people, as everyone is eager to save as much tax as they can.
If you opt for any income cum protection plan such as a unit-linked policy, you are required to pay the premium every month or every quarter/year depending on the mode of frequency opted.
Thus, this practice teaches disciplined investing with a long-term view.
9. Old is Not Always Gold
The fundamental principle of an insurance policy is risk coverage, and thus these are dependent on uncertainties.
Therefore, it is imperative to buy insurance policy early in life because it remains in force even if your health deteriorates with increasing age.
10.Peace of Mind
Death is the ultimate truth of life and it is inevitable.
Thus, the least you can do to secure the financial future of the family is subscribing to an insurance policy. This also provides peace of mind as then you are free concerning your family’s security.
Thus, we see that insurance policy – be it a term plan or an income-cum-protection plan remains critical to your financial planning.
An individual should never consider that insurance policies are a liability for the premium payment that is to be made for no returns (in case of term plan).
Remember, life doesn’t come with a guarantee card and thus as a responsible family person you should make investments by taking into consideration the needs of your family members.
Disclaimer: The views expressed in this post are that of the author and not those of Groww