As life is full of uncertainties, only a prudent financial decision can secure a bright future for your near ones even during dark hours. As we grow older, the responsibilities also grow. Getting yourself a life insurance policy is one of the wisest decisions you can take to address your financial goals for a sound future. Owing to its protection and tax-savings qualities, life insurance is one of the best investment plans, too.
The importance of life insurance is paramount. The insurer pays a sum of money to a designated beneficiary, in the exchange of premiums. Depending on the types of life insurance, the benefits can be claimed either on the demise of the insured or after the end of the policy term.
Here are seven reasons why you should consider taking up a life insurance policy:
1. Secure finances – The demise of a family member comes with a two-pronged challenge – financial and emotional. By choosing a life insurance policy plan with adequate coverage, you are in a position to provide monetary assistance to your dependents in times of need.
2. Pay off debt - The last thing you would want is the burden of debt on the shoulder of your loved ones when you are no longer there. A life insurance policy can take care of your financial liabilities, repaying any loan or debt being one of the principal ones. It serves as a financial safety net for your family, should anything happen to you.
3. Keep financial goals on track - If you are the sole breadwinner of the family, the proceeds of your life insurance policy can secure sufficient funds to carry on your financial goals along with providing for the day-to-day expenses. With a high coverage life insurance policy in your kitty, you can rest assured that your short as well long-term goals will be taken care of.
4. Build a corpus for life goals - Be it purchasing an asset or providing for the higher education of your children, a life insurance policy such as an endowment plan ensures you can take care of these goals with the policy money on maturity. In the case of a term plan, which offers only death benefits, your nominee and the other beneficiaries will be financially empowered to fulfil those goals.
5. Save taxes - The life insurance premium that you pay is eligible for tax-reduction benefits under section 80C of the Income Tax Act 1961. This offers a signification tax-reduction benefit on your inheritance. However, the premium amount up to Rs.1.5 lakh paid in a fiscal year is only eligible for the exemption.
6. Diversify investments - Life insurance policies like endowment plans and unit-linked insurance plans (ULIPs) are excellent investment options. If you have traditional investments like fixed deposits, you can add a life insurance plan in your financial portfolio to diversify your savings.
7. Secure post-retirement life - There are an array of endowment and life-saving plans that offer retirement benefits in the form of a regular monthly income. This money is accrued from the premiums you pay and comes as an add-on to the other benefits of a life insurance plan like the sum assured and maturity bonus (if any).
Take a life insurance policy as early as possible, ideally right after you start earning. Starting early gives you the advantages of a lower mortality rate, low-risk rate and coverage for a longer time period. Compare the best life insurance policies in India and choose the one that offers you the best returns in terms of cash value, riders and coverage.
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