There’s a lot of uncertainty surrounding us. Life in itself is uncertain. You never know what might happen now or in the future. Therefore, it is crucial for you to account for this uncertainty and unpredictability of life. And what better way to do that than by investing in a life insurance plan? If the question ‘what is life insurance and do I need one?’ running on your mind right now, then this article will be of help.
What is life insurance?
A life insurance plan is a tool that can help you financially protect your family’s future. It is basically a contract that an insurance service provider and an individual enter into, where the insurer agrees to pay a certain sum of money, known as the death benefit sum assured, to the family in the event of the said individual’s demise or certain amount of money is paid on maturity, which is known as maturity benefit.
However, the individual, in return for this service would have to pay a certain amount of money, known as premiums, to the insurer on a regular and periodic basis. The validity of the life insurance policy is not unlimited and is restricted to the number of years that the individual chooses at the time of purchase.
Now, if the individual faces an untimely death during the policy tenure, the insurer would be obligated to pay the agreed death benefit sum assured to the family of the deceased. And if the individual survives till the end of the policy tenure, depending on the different types of life insurance plans, then they may be eligible to receive maturity benefits. That said, there are certain life insurance plans that don’t pay any maturity benefits if the individual survives till the end of the tenure.
Here’s a quick look at some of the few different types of life insurance plans.
- Term insurance plans
- Unit-Linked Insurance Plans (ULIPs)
- Traditional endowment plans
- Whole life traditional endowment plans
- Child insurance plans
- Pension plans
Why do you need to insure your life?
One of the main benefits of life insurance is that it gives both you and your family a sense of financial security. How, you ask? Here’s how.
Take the case of Amit. He is employed in a well-paying job and earns quite well. Also, he’s the sole breadwinner of his family. One day, he gets involved in an accident and as a result dies, leaving his family distraught. Since he was the sole breadwinner, the family is now unsure of meeting their monthly expenses.
See, how the life of Amit’s family changed all of a sudden? All of this could have been avoided if only Amit had just invested in a life insurance plan.
Now let’s say that Amit had invested in a life insurance plan. Following his death, the insurance service provider would have paid out the death benefit sum assured to his family, which they could have used to make up for the loss of income that they had to suffer. Although Amit is no more, he ensured that his family was well taken care of by simply investing in a life insurance plan.
This is one of the primary reasons why you should ensure that you insure your life. With an adequate life insurance policy, you can continue to secure your family’s financial future even when you’re not around.
Other benefits of life insurance
That said, fear of life and inadequate financial security shouldn’t be the only reason for insuring your life. As a matter of fact, other than financial security, there are many additional benefits of life insurance as well. Here’s a brief look at a few of them.
1. It has an investment component as well:
As you’ve already read above, many types of life insurance plans come with maturity benefits. This means that if you survive till the end of the policy tenure, the insurer would be obligated to pay you a certain sum of money. By investing in a life insurance plan, you can not only financially protect your family, but can also create wealth in the process.
2. You can further your life goals:
The amount that you receive at the end of the policy tenure can be used to satisfy your life goals. With the maturity benefits in your hand, you can take that vacation that you’ve been planning for all along or purchase your very own house. The choices are endless.
3. You get to enjoy several tax benefits:
Did you know that you can save tax by investing in a life insurance plan? Yes, you read that right. The premiums that you pay towards a life insurance policy can be claimed as deductions under section 80C of the Income Tax Act, 1961. That’s not all. Under section 10(10D) of the Income Tax Act 1961, the maturity benefits and the death benefit paid out to you or your family by the insurer is also not taxable. The said tax benefits are subject to the conditions mentioned in the Income-tax Act 1961.
So, what are you waiting for? Go ahead and consider getting yourself a life insurance plans and secure your family’s financial future and further your life goals now. Here’s a parting tip for you. The earlier you purchase a life insurance policy, the better since you may get to enjoy lower premiums.