A life insurance policy is one of the only few investment options that come with a guaranteed payout in case of the policyholder’s untimely demise. This ensures that their dependents have access to funds to support themselves financially even after the passing away of the policyholder. This ensures a better life for your loved ones so that they don’t have to make any compromises in life.
Let’s take a brief look at the various types of life insurance policies in India.
Types of Life Insurance Policies
1. Term life insurance: This is pure life cover with additional benefits and riders to increase its scope; however, it doesn’t come with any savings or maturity component.
2. Whole life insurance: This policy gives you a cover for life with a savings component.
- Endowment Policy: An endowment plan gives you life cover till the end of the policy term with a maturity benefit paid out as a lump sum once the policy fructifies.
- Money Back Policy: This policy is a combination of savings and protection. So, while it offers you a life cover, a percentage of the sum assured is paid out at regular intervals to the policyholder.
- Unit Linked Insurance Plan (ULIP): It’s a policy with an insurance and investment component that promises higher returns by investing in debt and equity funds. However, it’s riskier compared to the others as there are no guaranteed returns.
Now that we have taken a brief look at the types of life insurance policies let’s look at the top 10 reasons why you might need a life insurance
Greater Cover at Lesser Premium
By investing early on, you can get a higher sum assured at a much lower premium. This is often not possible with other types of investment schemes.
Guaranteed Sum Insured
Life insurance gives a guaranteed payout as sum assured to the nominee (s) of the policy holder in the untimely death of the insured. This gives their dependents access to instant funds, which isn’t possible with other types of investment options since it might take some time to liquidate the funds; moreover, there is no guaranteed amount in the case of market-linked plans. This makes a life insurance secure and stable investment.
Wealth Creation
A life insurance plan can help you build wealth by investing a percentage of the premiums you pay into various funds, which are handled by experienced fund managers to get you maximum returns on your investment. This gives you corpus at the end of the policy term.
Tax Savings
Let’s you save on taxes under Sec 80 D of the Income Tax Act. Moreover, the maturity amount that’s paid out at the end of the policy term (except for term insurance) is also tax-free. However, tax laws are subject to change from time to time.
Better Retirement Planning
Investing in a life insurance plan that comes with a savings and maturity benefit component helps you plan your retirement better. You receive a lump sum amount at the end of the policy term that can help you stay financially independent even after your retirement.
Fulfill Long Term Goals
Depending on the plan, you can make small investments that you can accumulate over time, helping you buy a home or start your own business.
It’s a Savings Tool
With disposable incomes increasing, it is often enticing to buy things on impulse that, leaving many with no savings. A life insurance acts as a savings instrument, where the premiums you pay go into building long-term wealth to make you financially stable.
They can be Customized
A life insurance plan can be tailored as per an individual’s requirements, such as any medical conditions or major illnesses, offering a much greater safety net for the policyholder and their dependents.
Acts a Financial Safety Net
In case the policyholder passes away while the policy is still in effect, it provides their dependents with a lump sum amount as the sum insured, providing them with a much-needed financial safety net.
Peace of Mind
There is no other investment that gives you guaranteed peace of mind as a life insurance plan does. The guarantee of a sum assured is paid out to the family in case of an untimely demise, and the prospect of accumulating wealth at the end of the policy term if the insured survives till the end of the policy term is something that is unmatched.
There are multiple plans designed to meet your unique requirements and help you build wealth and a financial safety net for your family at affordable premiums. So, if you had been holding back on getting a life insurance policy, now you know why it’s so important that you invest in one!
