Benefits of Buying Life Insurance Policy
Updated On Apr 23, 2021
Table of Contents
A life insurance policy not only provides financial protection but also acts as a long-term investment option to accomplish the financial goals that you may have planned in life. The first step is to ensure you have some basic understanding of life insurance. Different life insurance policies offer different benefits.
Benefits of Life Insurance
Life insurance takes care of the insured’s/policyholder’s family if something should happen to the policyholder/insured. Besides, beyond the life insurance coverage amount, different kinds of plans can provide various other benefits too. Some key benefits of life insurance are as follows.
1. Secure Your Family’s Future
Life insurance offers risk coverage to the insured/policyholder’s family in the form of monetary compensation in return for the premiums paid. The greatest peace of mind is given by getting life insurance. This is because the insured/policyholder knows his/her family/loved ones would have a financial safety net if he/she were to die. All of us have some financial obligations, but in the case of our death, an appropriate life insurance policy assures that our debts can be financially managed by our loved ones/family.
2. Different Plans
Life insurance companies have different/diverse plan types for insured dependent on his/her need for insurance. Additional benefits come with a more premium. Life insurance policies also cover health-related expenses such as hospitalisation expenses and critical illness treatment.
3. Tax Benefit
Dual tax incentives are provided by life insurance policies. Under Section 80C of the IT Act, the premiums charged offer a tax deduction. This means that the premium charged annually is deducted from your taxable income by up to 1.5 lakh, thus minimising your tax outflow. Also, the “maturity amount” is tax-free under section 10(10D)
4. Retirement and Meeting Financial Goals
You can ensure you get a steady source of income per month with a life insurance policy. Putting money into an annuity is like putting some money into a life insurance policy regularly and getting a stable income every month, even after retirement. It will help you accomplish your long-term financial goals, such as owning a home or preparing for your retirement, because it is a policy which keeps you invested for the long term.
5. Savings
A few life insurance policies also come with the saving plans, that is, they put your money in profitable ventures. Some life insurance policies also give you the option to generate income. These plans (ULIPs, for example) invest your premium in multiple investment classes to offer higher "risk-adjusted returns" that exceed inflation and boost your corpus, in addition to providing you a life cover.
Conclusion
A critical part of your investment plan could be life insurance. Life insurance is a risk minimisation and security instrument that will in different ways aid the insured/policyholder and his/her dependents in coping with a range of life events. You can make a proper decision by considering the key characteristics/benefits of a life insurance plan.
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