The secret to good life is hidden in this investment!
A life insurance policy is often an investment in your or your family’s future, but it may also contain provisions that allow you to lay away money now that you can access for future needs. Common investment forms, such as stocks or mutual funds, enable you to put money into something that will grow in value as the investment matures.
While you may think of life insurance premiums as a means of funding a death benefit, many plans enable you to direct a part of your premium toward a cash value that may increase. The cash value of your insurance policy may also be withdrawn or utilised as a loan, enabling you to spend the money any way you see fit, including putting them into other investment vehicles.
Variable life insurance and equity-indexed life insurance plans enable you to utilise the cash value directly in standard investment vehicles such as indexed stocks or mutual funds.
The significance of investing in a life insurance policy cannot be overstated. Life insurance benefits are intended to provide financial protection in the event of the policyholder’s death and serve as a sound investment strategy that may help you achieve a variety of life objectives. The life insurance business in India has been steadily growing as more individuals realise the need to invest in life insurance policies. Between April 2016 and March 2017, the life insurance business grew by 12%, with premium revenue reaching Rs.105.26 billion.
In India, there are around 360 million policyholders and counting. However, the insurance industry is expected to increase at least 12-15 per cent over the next five years, indicating that a significant portion of the population is still uninsured.
Despite its large population, India’s insurance business contributes barely 1.5 per cent of worldwide insurance premiums. This demonstrates a critical need for insurance coverage for most Indians.
Why Is Life Insurance So Important?
Having a life insurance policy is vital whether you are married with children, have a partner, or have other families who rely on you financially. After you die, life insurance pays you money to your designated beneficiary, known as a death benefit. It may enable your loved ones to have access to funds when they are in need.
Understanding life insurance may assist you in making long-term financial plans for your family. Here are five reasons why you should get life insurance.
1. Protect Your Family Financially
Life insurance benefits are intended to assist in safeguarding your family’s financial future. Even if you have resources, it is doubtful that they will be sufficient to meet your family’s costs for many years, if not decades, if anything unforeseen occurs to you.
2. Replaces Lost Income
Whether you have a 9-to-5 job, are self-employed, or operate a small company, your income may cover some or all of your family’s daily expenses.
Housing, food, electricity, clothes, automobile maintenance, and health care premiums are likely all part of your monthly budget, and your family will still need to fund these expenditures even if you lose your job. A life insurance policy‘s death benefit may assist give the income your family may need to offset these expenditures.
When weighing your alternatives, try utilising a life insurance calculator to help you calculate how much life insurance you may need.
3. Pay Off Debt
Specific forms of debt may not disappear after you die, so your heirs may have to spend money from your inheritance or sell other assets to pay them. This may leave less money for costs.
Life insurance may assist your loved ones in repaying any debt you leave behind, such as credit card debt, company debt, personal and/or educational debt, and home debt. At a time when your loved ones are already grieving your death, a life insurance policy may assist in alleviating some of the financial obligations they may face following your death.
4. Cover Funeral Expenses
Funerals may be costly. Dealing with financial hardship may exacerbate emotional stress in your family. Your family may be able to utilise part of the death benefits from your life insurance policy to help cover these expenses.
To do this, the policy’s recipient might direct part of the death benefits to the funeral home, or they could pay out-of-pocket and utilise the death benefit as reimbursement.
5. Reduce stress
One of the best life insurance benefits is that it reduces stress. It is often an emotional and difficult period when a loved one dies. This extremely stressful time might be made more difficult if there are worries about replacing income and paying expenses.
While your life insurance coverage may not fix every difficulty, it will help your family get back on their feet. Knowing they have your death benefit, for example, to pay the mortgage, might offer your spouse the time they need to go on at their speed.
6. Offers Higher Savings on Taxes
With your insurance coverage, you might expect to save money on taxes. Life insurance premiums always qualify for the maximum tax deduction of Rs.1.5 lakh under Section 80C. In addition, you will be entitled to tax-free profits upon maturity/death under Section 10 (D) of the Income Tax Act of 1961.
7. Pay Daily Bills
One of the primary reasons individuals get life insurance is to assist their families in covering everyday expenditures such as food, electricity, and vehicle payments. According to the LIMRA 2021 research, 63 per cent of consumers purchased a life insurance policy to replace their income.
Consider all of the expenses that your income supports. If your salary suddenly disappeared, your family would need another source of money to cover all of their expenses. Because life insurance is often paid out considerably quicker than estate settlement, which may take months after a death to complete, it can also give help sooner so your family is not financially burdened.
8. Protect Your Business
Building a company is one of the most successful methods to create long-term wealth for your family.
If you’ve worked hard to develop your own company, life insurance may assist keep it running if you die suddenly. An insurance payout offers a cash injection to help meet payroll, inventory, and any other urgent financial demands. It is less expensive than borrowing from a bank or credit union.
Wrapping It Up
Understanding life insurance benefits and how much coverage you may need may aid in long-term financial planning. Making measures to assist your family’s financial security in the case of your death may help to alleviate the stress and strain of an already terrible period. A life insurance policy can be a significant aspect of your strategy, depending on your financial objectives and requirements.