A life insurance policy refers to a contract between the insured and the insurer. While the insured promises to pay a life insurance premium for a fixed tenure
What do we do to ensure financial security for the future? We spend all our lives accumulating wealth for the future, even if it involves cutting down our expenses, sacrificing buying the things we love, and investing in equity and government bonds. We may think that we are acing our financial planning, becoming a responsible adult when it comes to ensuring a protected financial future for our family.
But we would always be one step behind if we do not have a life insurance policy in our financial kit. This is not to say that you don’t need to build sizeable savings; you need it. But our future is filled with loads of expenses from head to toe. Our savings fund can be channeled to meet those expenses.
However, when it comes to life insurance, it can come in handy for your family in the future in which you are not around. We will be telling you how and why. But, before we do that, let us understand a life insurance policy in detail, shall we?
What is a Life Insurance Policy?
A life insurance policy refers to a contract between the insured and the insurer. While the insured promises to pay a life insurance premium for a fixed tenure, the insurer promises to offer a guaranteed sum to the family in the event of the unfortunate demise of the insured. This is known as the death benefit. Some life insurance policies also offer a survival benefit, where you are paid a sum if you survive the policy term.
Why Do you Need a Life Insurance Policy?
Buying a life insurance policy in India is not necessary. However, it’s definitely a tool you need. Here is why:
- Death is the Bitter Fact of Life:
We hate to sound negative here, but here’s a piece of truth you may not like. Life is not guaranteed. You can be fit and fine and be in the best of your health, but you cannot say the same thing for the immediate or foreseeable future. Accidents and critical illnesses sometimes ring your bells without warning. Unfortunately, most of the time, you cannot avoid it; however, what you can avoid are the financial repercussions that come with death by investing in life insurance.
- Ensures Financial Security in your Absence:
If you are out there, working a 9 to 5 job, or handling a business of your own only to provide a comfortable lifestyle for your family, you are no less than a hero.
As much as ensuring financial security is crucial in your presence, it is equally important during your absence. But how do you do that? How do you ensure that your family remains financially stress-free even during your absence? Is it even possible?
What if we tell you, you can provide for your family even during your absence? Yes, you heard it right. That is what a life insurance policy is designed for.
A life insurance policy ensures that your family stays protected through a financial safety net if you die untimely. It offers the nominee a guaranteed sum to help them manage expenses in the insured’s absence.
- You can Protect as well as Support your Savings:
Is it your dream to provide top-notch and quality education to your children? Is it your dream to live a peaceful life on the outskirts after retirement? If yes, that’s what your savings fund should be used for.
Your savings fund can be channeled to better uses if not providing for your family in your absence. You may use it to meet medical emergencies, fulfil your retirement dreams, and finance your child’s education or marriage – in a nutshell, you can use it for various purposes. A life insurance policy aims to protect your savings by reserving it to meet the financial requirements of the future during your absence.
In addition, it can be used to support your savings as well. Some life insurance policies come with a survival benefit, wherein you get a set sum if you survive the policy term. This sum can be used to fund your financial requirements.
- You Get Tax Benefits:
Are you trying to save tax? What if we tell you there’s a legitimate to do that? Invest in a life insurance policy. Under Section 80C of ITA, you can claim tax benefits on life insurance premiums paid. In other words, the premium you pay on life insurance can be tax deductible. You don’t need to pay tax on them; hence you save the tax that would have been deducted from your income.
The Bottom Line:
Life insurance is not a mandatory purchase, but it’s certainly the need of the hour. So now that you know the importance of buying life insurance, we hope you consider buying life insurance at the earliest.
