We all know life insurance is so crucial for protecting the future of your loved ones in case of an ill eventuality. But sometimes it has an added benefit of investment. You can choose to invest in any one or more long-term tax-saving investment alternatives accessible in the financial market. A life insurance policy, in addition to providing several benefits to the policyholder also provides various benefits to the policyholder's family and nominees.
Who should consider purchasing life insurance?
When thinking about purchasing life insurance, one of the first concerns you'll have is, "Who should get life insurance?" The answer to this question relies on the individual's financial condition. Generally, anyone with a financial dependent would benefit from purchasing life insurance. Children, a spouse, a sibling, or even dependent parents might all be considered financial dependents.
Investors who wish to profit from tax savings as well as long-term financial growth are another group of people who should get life insurance. One of the few investment avenues that provides both of these benefits is a life insurance policy. Aside from these advantages, there are several more ways in which life insurance may benefit one.
Here are some features of insurance you must know of.
1. To Compensate for Revenue Loss
In the case of the policyholder's death, a life insurance policy pays out death benefits. This is often a lump sum payment or even a periodic income depending on pay-out option chosen. This helps to assist the insured's family in dealing with the loss of their major source of income. If you are the main earner in your family, life insurance can help protect your dependents' future by providing financial benefits. This is the most significant features of insurance.
2. To Pay off Past-Due Obligations
Debts incurred in the insured's name continue to be a financial liability even after the policyholder's death. However, without another source of income, the deceased's legal successors may be unable to settle any outstanding obligations. This is when the sum assured of a life insurance policy might come in.
3. To Cover Educational Costs
Another one of the most important features of insurance is that it can help you cover educational costs for your children. If you buy a life insurance policy in your twenties, it is very probable that the plan will mature around the time your kids reach college-going age. The earnings accrued as part of the maturity benefits might assist you in meeting the high expenditures of higher education.
4. Diversifying Your Investments
Another important feature of insurance is that it helps you diversify your investments. Life insurance is one of the few investment opportunities with very minimal risks. If your existing investment portfolio is in need of some steady low-risk assets, obtaining a life insurance policy can assist you in balancing your risk exposure. All you have to do is pay your premiums on a regular basis to ensure that your investment returns are assured.
5. To Put Money Aside for Retirement
If you do not have a retirement plan, purchasing life insurance might be a good start. You can save money on premiums if you buy a protective cover when you're younger. So, for a minor monthly, quarterly, semi-annual, or annual charge, you can maintain your investment plan and contribute to your retirement fund. This is one of the most significant features of insurance policies.
6. To Profit from Tax Concessions
Another one of the most talked-about features of insurance is that it is a tax-fee investment option. The premiums you pay can be deducted from your total taxable income up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. In addition to this deduction, the maturity or death benefits received from an insurance plan are tax-free according to Section 10(10D) of the Income Tax Act. However, tax laws are subject to change.
These life insurance features make it clear that purchasing a life insurance policy is your gateway to safeguarding the lives of your loved ones even when you’re no longer around. Aside from this, life insurance is also one of the most advantageous investment instruments that offers lucrative returns with minimal risks.
Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.