Life insurance is one of the cornerstones of financial planning, and people are now realising its importance. In fact, insurance penetration in India grew from 3.76% in 2020 to 4.2% in 2021. India ranks 10th in the life insurance market [EW1] globally.
These numbers point to the need for financial security that life insurance fulfils. To cater to modern consumers, life insurance has evolved to offer a variety of plans such as:
- Term life insurance
- Whole life insurance
- ULIP (Unit Linked Insurance Plan)
- Endowment plans
- Child plans
- Retirement plans
Apart from offering financial support for your family, life insurance can help you create wealth as well as save taxes and more. Read on to know why life insurance is a must.
Ensure your family’s well-being
One of the main reasons to buy life insurance is to prepare for the risk of premature death. If this unfortunate event occurs, having a life insurance policy gives a monetary benefit to your beneficiaries. This benefit is called the sum assured or the cover.
What’s more, this payout is exempt from tax as per Section 10 (10D) of the Income Tax Act.
If you are the primary earner in your family, getting life insurance becomes even more crucial. It helps your spouse and children rely on these funds to retain their standard of living. For instance, your family could these funds towards home rent, education expenses and more.
Further, if you have taken a loan, be it a home loan, car loan or a personal loan, the sum assured can ensure your family is not overwhelmed by debt in your absence. Based on your chosen policy, these payouts could be a one-time sum, annual or monthly payments.
Save taxes and build wealth
Life insurance premiums also help reduce your taxable income as per Section 80C of the Income Tax Act. This helps you get a tax exemption of up to ₹1.5 Lakhs in a financial year.
Moreover, you can choose a life insurance policy that offers you an investment component. For instance, with ULIPs you can invest for the future as per your risk appetite. While the premiums in such policies are higher, they help you create wealth while securing your family.
You may even earn dividends based on which investments your policy is linked to. However, these returns are not guaranteed. So, you must be aware of the potential returns and losses you could face!
One option to consider for reducing your risk is choosing endowment plans. Unlike ULIPs that invest in hybrid, equity or debt funds, endowment plans offer assured returns. Thus, you can consider them as long-term savings plans.
Finance retirement and other goals
Planning for retirement is another important life goal that life insurance plans can help with. By signing up for an endowment plan or an assured-return plan, you can accumulate wealth for your golden years.
Once such a plan matures, you can get a payout either in lump sum or at frequent intervals. Such a plan can also help you meet other life goals, be it buying a home or other assets, financing your children’s education or more.
Besides all these advantages, life insurance also:
- Helps protect your business venture with other partners
- Aids in securing you against critical illnesses
- Supports debt repayment
To browse through a range of affordable life insurance plans and compare their features easily, use the Mobile App. This app offers you a range of top financial and lifestyle products. Download it from Google Play or the App Store and sign up for life insurance in no time!