Did you know that nearly 74% of Indians do not have any form of life insurance coverage? According to a recent survey, this is because most people believe that they cannot afford life insurance or do not understand its benefits. However, the cost of living is rising, and with it, the need for financial security is also increasing.
Life insurance can provide a safety net for your family in case of your unexpected demise.
Let us discuss why life insurance is a must-have for families, and how it can help secure your family’s future:
1. Provides Financial Security:
Life insurance provides financial security to your family in case of unexpected death. The sum assured, which is the amount paid to the beneficiaries upon the policyholder’s death, can be used to meet various expenses such as mortgage payments, children’s education, and other day-to-day expenses. In India, where the cost of living is rising, and education expenses are increasing every year, life insurance can help ensure that your family’s financial needs are taken care of.
2. Covers Outstanding Debts:
In case of the policyholder’s death, any outstanding debts are passed on to their family members. If you have taken a loan to buy a house, car, or any other asset, your family may be burdened with repaying the loan in your absence. However, if you have a life insurance policy, the sum assured can be used to pay off any outstanding debts, ensuring that your family members are not burdened with financial liabilities.
3. Tax Benefits:
Life insurance policies offer tax benefits under Section 80C of the Income Tax Act, 1961. The premium paid towards a life insurance policy is eligible for a tax deduction of up to Rs. 1,50,000 under Section 80C. Additionally, the sum assured received by the beneficiaries is also tax-free under Section 10(10D) of the Income Tax Act, 1961. This makes life insurance a great investment option as it not only provides financial security but also offers tax benefits.
4. Peace of Mind:
The loss of a loved one can be emotionally and financially devastating for a family. However, if you have a life insurance policy, it can provide peace of mind to you and your family. Knowing that your family will be financially secure in case of your untimely death can give you a sense of comfort and security. This peace of mind is invaluable, especially in uncertain times.
5. Low Premiums:
Life insurance policies come in various forms such as term insurance, whole life insurance, and endowment policies. Among these, term insurance policies are the most affordable and offer a high sum assured at a low premium. In India, where most people are looking for affordable insurance options, term insurance policies offer an excellent way to secure your family’s financial future without breaking the bank.
6. Inheritance Planning:
Life insurance policies can also be used as an inheritance planning tool. If you have multiple beneficiaries, you can designate the percentage of the sum assured that each beneficiary will receive. This ensures that your assets are distributed as per your wishes and can avoid disputes among family members.
7. Wealth Creation and Savings:
Certain life insurance policies, such as whole life or endowment plans, have a savings or investment component. These policies not only provide a life cover but also enable you to accumulate wealth over time. The premiums paid towards these policies build cash value or generate returns, which can be utilized for various financial goals such as retirement planning or funding major expenses.
8. Business Protection:
Life insurance can play a vital role in protecting businesses, especially in cases where the business heavily relies on the key person or owner. Key person insurance ensures that the business can continue its operations smoothly by providing funds to cover financial losses or recruit and train a replacement in the event of the key person’s death.
9. Supplementing Retirement Income:
Annuity plans, a type of life insurance policy, provide a regular income stream during retirement. By paying regular premiums during your working years, you can secure a guaranteed income for yourself and your spouse in retirement, ensuring financial stability during your golden years.
10. Health Coverage and Critical Illness Benefits:
Some life insurance policies offer riders or add-ons that provide coverage for critical illnesses or medical expenses. These benefits can help in covering medical costs, providing financial support during challenging times, and easing the burden on your family’s finances.
11. Loan Collateral:
Life insurance policies can serve as collateral for loans. If you need to secure a loan, having a life insurance policy can make it easier to obtain favorable loan terms and conditions. The policy’s cash value or death benefit can be assigned to the lender, reducing their risk and potentially leading to lower interest rates.
These tips are brought to you by expert Financial Planners at HappyWise Financial Services.