Think about Life Insurance and many things can fill your mind like tax-saving, financial security for your family in your absence, your child’s education and marriage, family’s ability to pay off loans, among others.
Here are eight ways life insurance can benefit individuals:
- Life Cover
The most important reason for buying life insurance is life cover or financial protection against death. This is particularly so, if you are the breadwinner of the family. Regardless of how much you have saved or invested over the years, contingent events such as death or critical illness always put undue stress on the family’s finances apart from the emotional drain. With an insurance plan, you at least have the financial part of the loss covered.
- Goal-based Investing
Also known as life stage investing, it involves setting specific goals and defining an investment plan for each goal.
Goal-based investing is common in developed markets where individuals have separate investment plans catering to child’s education, retirement and so on.
Indians are increasingly pursuing a goal-based approach to realizing life stage milestones be it while buying a house, a car, providing for child’s education, marriage, annual pilgrimage, among other objectives.
Insurance can help individuals achieve these goals with specific plans in certain cases designed to fulfill objectives like child’s education for instance.
- Retirement Planning
While you run the risk of untimely death which insurance takes care of, there is also the chance that you will live long and must negotiate post-retirement expenses. This can be particularly challenging since you will likely not have an income after retirement to provide for the family’s expenses.
Again, life insurance has a role in helping you settle into a peaceful retirement life. With a pension plan, you can fashion a steady source of income post-retirement. Known as annuities, they are very useful in securing the post-retirement future of you, and in your absence, your loved ones.
- Security Against Rising Health Expenses
In addition to providing risk cover, life insurance also secures you financially against critical diseases and hospitalization expenses. Considering the rising incidence of medical contingencies and lifestyle diseases, a medical cover has assumed much importance.
- Home Loan Cover
Every responsible individual has to worry about how his family will cope financially in his absence, especially when it comes to coping with long-term expenses like a home loan for instance. Life insurance has a way to secure your family even from that contingency. Mortgage protection or home loan cover insurance cover the home loan and make good the pending EMIs on the policyholder’s death.
- Long-term Savings
Life insurance serves the dual purpose of providing risk protection and building savings over the long-term. Traditional plans/endowments are efficient in channelizing savings by ensuring there is a pool of money at the end of the tenure. The money can be used towards achieving a specific goal like child’s marriage for instance.
- Participation in Stock Markets
ULIPs or unit-linked plans open a window to stock markets allowing the policyholder to benefit from long-term growth in equities. There are various plans catering to individuals with diverse risk profiles. High ULIP costs, which were a problem, have been lowered considerably.
- Tax-saving
Tax-saving or tax-planning is an important part of financial planning. If wisely done, it can serve a dual purpose – help individuals meet their financial goals and save tax in the process.
Individuals can get a maximum deduction of Rs 1.5 lakhs/year on insurance premium. This includes a maximum of Rs 1 lakh on pension plan premiums.
The good news is Life Insurance can achieve all this and more.
