Ensuring the financial stability of our families is a priority for all of us. To this end, we work hard and try to save a substantial portion of our incomes. However, life is unpredictable and filled with challenges we often cannot prepare for in advance. Therefore, purchasing a life insurance policy is a decision we should all take seriously.

 

A life insurance policy acts as a safety net for your family in the unfortunate event of your passing. In this context, you can choose from different types of life insurance policies, including a term insurance policy and a whole life insurance policy.

 

 

What is a Life Insurance Policy?

 

A life insurance policy is an agreement between an insurance company and a policyholder wherein the former agrees to pay a predetermined amount to the latter's nominee in the event of the latter's death or after the completion of a certain period. It is important to note that the concerned insurance provider provides the aforementioned protection in exchange for a premium amount.

 

Therefore, a life insurance policy is a simple way of safeguarding the financial future of your family and ensuring that they do not face any financial constraints in your absence. The premium amount of a life insurance policy is determined on the basis of the insured's age, medical history, the term of the policy, and the type of the policy. It is always advisable to purchase a life insurance policy at an early age, say in your twenties or thirties, so as to enjoy the benefits of a low premium.

 

Here's Why You Need a Life Insurance Policy

There are several benefits of investing in a life insurance policy, particularly at an early age. Some of the aforementioned benefits have been discussed below.

 

1. Life cover 

A life insurance policy provides you with a life cover that enables you to secure your family's future after your demise. Some types of life insurance policies also include an element of investment and return on investment, thereby allowing you to build a substantial corpus from which to earn a regular stream of income for fulfilling all financial goals and planning for retirement.

Furthermore, you can also choose life insurance plans that provide a life cover to you as well as your spouse. Some of the aforementioned plans continue after the death of the primary policyholder and provide the secondary policyholder a continued life cover and the claim settlement.

2. The dual benefit of a savings plan and an insurance cover

Most life insurance plans offer the dual benefits of savings and insurance. For instance, a unit-linked insurance plan (ULIP) enables you to save a part of your insurance premium in market-linked instruments. Furthermore, you can choose your investment portfolio on the basis of your risk appetite.

 

3. Systematic pursuit of financial goals

Another important benefit of purchasing a life insurance policy is that it allows you to pursue your short-term and long-term financial goals in a planned and organised manner. For instance, if you want to start a small business at the age of forty and want to save for it in a systematic and continuous manner, a life insurance policy is a brilliant option for you.

4. Planning for important personal milestones in life

A life insurance policy is an effective tool to plan for important personal milestones such as buying a house, going on that much-awaited foreign trip, organising your child's marriage, paying for your child's education, starting your own venture, providing for the sabbatical from work and planning for your retirement.

 

5. Assistance during medical contingencies

Some life insurance policies also provide a critical illness cover to enable policyholders to secure funds in case of serious medical emergencies. Furthermore, you can add a critical illness cover as an add-on feature to your life insurance cover. The Tata AIA life insurance policy, for instance, has the option of adding a protective cover for accidental death, critical illness, disability, and terminal illness.

 

6. Protection from the cycle of debt

Saving in a life insurance policy is an effective approach to pursuing the fulfilment of your financial goals. By following the aforementioned approach, you can escape the vicious cycle of loans and repayments in order to meet your financial obligations at different points in your life, including during emergency situations.

 

7. Tax* benefit

Whether you invest in a term plan, whole life plan, or a ULIP, you will be entitled to receive a tax * benefit on the premium paid by you. Section 80 C of the Income Tax Act, 1961 provide tax* relief on a life insurance premium payment upto ₹1,50,000. You can further avail of tax exemption on the maturity benefits and the death payout as per Section 10(10D) of the Act, subject to specific conditions.

 

8. Retirement planning

One of the most important benefits of investing in a life insurance policy is that it can help you plan and prepare for your retirement. There are several life insurance policies that comprise the feature of monthly payments to the policyholder after the expiration of a certain period. Therefore, you can accumulate a substantial corpus for a predetermined period then enjoy the payouts of your investment in a frequency of your choice, that is, monthly, yearly, or as a lump sum amount.

 

Conclusion

 

Therefore, a life insurance policy is an effective tool that combines the benefits of insurance, investment, and tax* savings. By purchasing a life insurance plan, you can safeguard the future of your family and optimise your savings and investments.

 

L&C/Advt/2022/Jul/1704