Many individuals often believe that purchasing an insurance policy is a waste of money. However, this is not the case. A life insurance policy provides the much-needed financial security in an unfortunate event of the death of the policyholder. Besides, you may also reap maturity benefits in case of survival during the policy tenure.
Understanding life insurance
Life insurance may be understood as an agreement between two parties—the insurer and the insured—where the insurer is liable to pay the sum assured to the beneficiary upon the death of the policyholder. This acts as a reassurance as thefamily memberswill be able to meet their lifestyle expenses and other financial obligations even in the absence of the policyholder.
Is insurance really needed?
Purchasing a life insurance plan, be it aterm insuranceor an endowment insurance, is a smart financial decision. Doing so offers a plethora of benefits. Following are the four major reasons to invest in a life insurance policy.
- Provides financial security
Many ignore the fact that a sudden mishap or an emergency may leave their loved ones financially crippled. In case of an unfortunate event of the death of the breadwinner, the family may find it difficult to make ends meet. It is, therefore, necessary to opt for a life risk cover, preferably a term insurance also called a pure life cover, to ensure that financially, your family is safeguarded at all times.
- Offers a return on investment
Apart from covering long-term risks of the policyholder, premiums paid towards alife insurance planare used for investment purposes as well. In case you have taken an endowment insurance, you may be able to save systematically over a period of time and after the completion of the tenure, you will be entitled to receive the accumulated corpus along with the build-up interest. This amount may be used to meet your long-term financial goals, such as meeting your children’s future education expenses or saving for your retirement.
- Offers tax benefits
The good news is that the premiums paid towards your term life insurance and whole life insurance are eligible for tax deduction. According to Section 80C of the Income Tax Act, 1961, the upper cap for exemption is INR 1.5 lakh per annum. Therefore, you may purchase a life insurance plan and lower your tax liability to a great extent.
- Provides enhanced coverage
Insurance providers offer numerous riders, also known as add-ons, in order to enhance your coverage. These riders may be added to your existingterm life insurance policy and may be availed of at an additional price. Some of the popular riders include a waiver of premium benefit, personal accident rider, and family income benefit, among others.
It is evident that investment in a life insurance policy is an absolute necessity. Remember, it is a risk-minimization tool, and hence must be purchased to protect the loved ones in the absence of the policyholder.