Reasons why one should purchase a life insurance
New Delhi : Life insurance is considered an important tool in managing the uncertainties of life and the financial risks that your family might have to face in case of your sudden demise. Considering the vital role that life insurance plays in one’s financial portfolio, it’s time you understand how this coverage can make a difference in your life. Before purchasing a suitable life insurance, you should make yourself aware of the various types of life insurance available in the market. All checks and comparisons regarding the plans and companies would surely go a long way in helping you take an informed decision. But before all this, the most important point is to understand the reasons behind buying a life insurance. Here are some of the reasons.
1. Financial Security for Family: A life insurance provides the financial cushion your family members would need after your sudden demise. If your family happened to depend solely on your income, then in your absence, your family would need an alternative source of income to carry on. A life insurance happens to do just this - when the death benefit received by the beneficiary in the form of sum assured takes care of various expenses in life.
2. Tax Benefits: Life insurance offers tax benefits along with death and maturity benefits. The premiums paid for life insurance are tax exempt under Sec 80C of the Income Tax Act, 1961. On the other hand, the amount received as death benefits is also tax exempt under Sec 10(10D) of the Income Tax Act, 1961. However, it is important to know that if the returns exceed 10% of the annual premium, then you will come under the tax net.
3. Repay Loans: In case of your sudden death, the loan that you took, be it in your name or along with your spouse, will not suddenly disappear. The EMI cycle for these loans would continue the usual way, with the payments to be made on time. In your absence, the loan repayment burden would only increase. This is the time when the sum assured which you receive from life insurance could be used in repaying loans.
4. Children’s Education & Marriage: Child plans, a type of life insurance, are a great instrument to take care of the soaring educational expenses. This insurance can also help in managing children’s wedding costs. Thus, parents can opt for life insurance to financially secure their children’s future.
5. Source of Investment: Insurance cannot be considered a pure investment tool. However, it can surely contribute to the investment kitty. Some insurance types, such as ULIPs, Money Back and Endowment, are a combination of both insurance and savings or investment. These insurance types provide some returns along with the sum assured. A part of the premium paid for these insurance plans are used for protection; while another part is invested in markets to create returns for you. In case of your sudden death, certain insurance plans would continue to pay the premiums on your behalf. Thus, even in your absence, a life insurance is there to take care of your investments.
6. Emergency Money: For many of you out there, life insurance might be a mere tax saving tool. However, you ought to realise its true potential in providing the emergency money your family or business would need when you are not there. Life insurance is not just for the salaried people, but also for those engaged in some kind of business. The sum assured which your family gets after your death can play a big role in managing the business or household income until your business gets on track, if it suffered a setback in your absence.
Thus, know your needs and requirements well before zeroing in on your plan. Compare the premiums, choose the correct policy tenure and the right sum assured to reap the benefits. Also, go for the plan which you can afford and would help in achieving your financial goal.
