When it comes to correctly putting the building blocks of your personal finance, Life insurance is the first tool that you should consider to secure the well-being of your family and dependents. In fact, it should always be insure first and then invest. I am sure you know what a simple life insurance is – a contract between an individual and the insurer in which the insurance company makes the payment of a lump sum or series of payments to designated beneficiaries in case the policyholder does not survive the tenure.
Premiums are paid over time, with coverage varying according to each individual’s needs and circumstances. Life insurance should ideally be used as a form of protection against loss in cases where one’s demise would cause financial hardship for dependents or loved ones. But in India, it is often used (by means of traditional insurance plans) as a way to manage wealth by providing fiscal resources to fund tuition costs, long-term care expenses, and retirement planning.
Why You Must Get Life Insurance?
There are many benefits to having life insurance, not only for the insured but for their families and loved ones as well.
It Can Provide Financial Security
First, life insurance provides financial security in case of the insured’s sudden absence. It gives consumers a sense of security knowing that their loved ones will be taken care of financially after they’re gone. This provides protection to the insured’s family while they are grieving and can use the funds to cover various expenses.
Life insurance policies can help to pay off debts and loans. This can save beneficiaries from having to foot the bill and provide them with one less thing to worry about.
Life insurance policies can provide additional income for the insured should they become ill or injured and unable to work. Depending on the policy, certain policies can provide income replacement for a period in the case of a disability. This can be invaluable for those in need of assistance in order to maintain their families’ quality of life.
It Can Offer Tax Benefits
Second, life insurance also offers tax advantages. Many policies offer tax-deferred growth on the cash value components, so the policyholder can enjoy the benefits of the policy without having to worry about immediate taxation.
Related Reading – Taxation of Life Insurance Premiums in India
Since the market is filled with various insurance options, buying life insurance can be a difficult yet important decision for individuals. It’s important to assess all options available and then pick one which suits their needs best. Life insurance offers many advantages, from providing financial security for beneficiaries to helping fund business succession plans. Ultimately, life insurance is designed to offer peace of mind for both the insured and their loved ones.
And when you are looking to buy an insurance, don’t just buy random covers of Rs 5-10 lakh. Find out what is the right life insurance cover for you and then put it in place as soon as possible. And what is the right cover? Different people will give you different answers. But there are few basic thumb rules – like having a cover of 10 or 20 times your annual income.
Remember that the primary purpose of life insurance is to secure your dependents financially. That is the top priority. Whether its Rs 1 crore, Rs 3 crore or just Rs 50 lakh is immaterial. There is no one-size-fits-all while taking a life insurance and it is always recommended doing a thorough analysis of your needs before deciding the final amount.