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How Can Life Insurance Be an Effective Investment Tool?

Updated On Jun 28, 2021

A life insurance policy’s primary role is to provide financial protection to the family of the life assured if something unfortunate happens. However, its function is not limited to life coverage only. Some life insurance policies also offer investment opportunities to the life assured to fulfil his/her long-term goals. Here, it is important to note that the investment returns are not always talked about in monetary terms but can be seen as investing in their future financial security as well. Read on to know more about how a life insurance policy can be an effective investment tool.

How Can Life Insurance Be an Effective Investment Tool?

Here are some ways in which a life insurance policy can be used as an effective investment tool.

1. Fulfil Long Term Goals

Some long-term goals like purchasing a new house or a car can be realized through the right life insurance policy. There are policies like ULIPs, which offer the twofold advantage of life coverage and investment that help in fulfilling such dreams through returns on these investments.

2. Children’s Expenses

As a parent, it is your duty to take the necessary steps to safeguard your children's future and ensure that you have funds to support your child's dreams and education. Here, a child's life insurance plan acts as a financial safety net and provides benefits on special occasions like higher education, marriage etc. Moreover, you can appoint your children as nominees who can get death benefits after your demise. 

3. Income Replacement

The death benefits paid in regular monthly instalments can act as income replacement for the beneficiary if the life assured dies within the policy duration. This helps ensure that your loved ones don’t have to suffer through a financial crisis to meet their day-to-day demands after your demise. 

4. Loan/Debt Repayment

Suppose the life assured dies before repaying a loan or a debt; in this case, the whole burden of the loan or debt repayment falls on the shoulder of his/her loved ones and dependents. The situation becomes more severe when the life assured is the sole breadwinner of the family. Here, a life insurance policy that provides death benefits can be used to repay the loan or the debt. Hence, with the right insurance policy, you can save your family from a debt trap. 

5. Retirement Plans

The retirement plan policies help in monthly income generation through pensions after retirement. This kind of investment in the life insurance policy will help ensure that the life assured does not have to depend on his/her children, friends or relatives in old age. 

6. Medical Conditions

The life insurance policy also provides financial relief in troubling times through its rider benefit provision. For instance, you can buy the critical illness cover if you have a family history of illness like heart attacks, cancer or kidney damage. Furthermore, a death cover rider with additional accident cover helps cover the accidental costs if the life assured dies in an accident.

Takeaway

The points mentioned above should be enough to convince you to consider a life insurance policy as an investment tool. Moreover, it is advisable to read all the terms and conditions of different policies offered by various insurance providers to choose the right one at affordable prices to get maximum investment benefits.  

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

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