Why You Must Invest in Life Insurance: Know its Advantages, Check its Different Types

Life insurance enables you to ensure your family's financial stability even after your passing. Life Insurance is the best way to safeguard the future of your loved ones even after your absence.

Benefits of Life Insurance Policies

AASHISH KUMAR JHA | Sep 19, 2023 |

Why You Must Invest in Life Insurance: Know its Advantages, Check its Different Types

Why You Must Invest in Life Insurance: Know its Advantages, Check its Different Types

Why You Must Invest in Life Insurance: Life is full of risks. Risk exists everywhere: when you travel to a foreign nation, ride your bike to a store nearby, or when a new bug is spreading across the community. All these risks pose a great threat to our life. This is why it is necessary to get insured. Every person therefore should invest in life insurance. Definitely, you cannot put a price tag on your life buying a life insurance will surely safeguard the financial needs of your loved ones when you are not around. Life Insurance is one of the best ways by which you can secure the future of your loved ones.

So, what basically is Life Insurance? Life insurance is a contract between an insurance company/government that ensures financial support in the event of a fatality in exchange for the payment of a certain premium. In a life insurance policy, the insurer will pay the agreed-upon amount to the beneficiary whose name is on the document in the event that the predetermined event—a loss of life—occurs. Some life insurance plans may provide financial benefits upon retirement or a predetermined amount of time. Thus, life insurance enables you to ensure your family’s financial stability even after your passing.

Advantages of Life Insurance

Now that you know the meaning of life insurance and its necessity, it’s time to get acquainted with the advantages of Life Insurance. Some of the advantages of life insurance are depicted below.

Guaranteed Fix Returns: Life insurance products ensure that you will get a defined sum of money after a specific period of time. You must examine the structures of various life insurance packages. Whatever you decide, you may be sure that the beneficiary will get the guaranteed death benefits if the data you supplied when enrolling for the insurance is accurate.

Risk Cover: Given the uncertainty of modern life, life insurance ensures that your loved ones maintain a high standard of living in the event of any unforeseen incident. You may remain at peace all the time as this insurance will give you the guarantee of risk coverage.

Safe Investment: The life insurance industry is heavily regulated. The regulating organization, IRDAI, assures through a number of rules and regulations that the security of the policyholder’s money is the top priority for all parties involved. Because life insurance is a long-term savings tool, it also ensures that life insurers put their attention on long-term returns and avoid making dangerous investment choices for quick gains.

Medical Coverage: The majority of these insurance provide coverage for potential medical and treatment costs if the policyholder becomes unwell. In order to secure your finances even while you are alive, you can add riders to the insurance policy to increase the coverage.

Tax advantages: Signing up for a life insurance policy might ensure you receive tax advantages. Under Section 80C of the Income Tax Act, the premiums you pay for the policy qualify you for tax exemptions of up to 1.5 lakhs of your taxable income. A full tax exemption is also granted for the death benefits.

Types of Life Insurance

Life Insurance Policies come in different types. Some of these types have been discussed below.

1) Term Insurance Plan: As implied by the name, term insurance plans are those that are bought for a set amount of time, such as 10, 20, or 30 years. Because these insurance don’t have any cash value and hence don’t have maturity advantages, they are less expensive than other policies. Only when the event really occurs does this policy become advantageous.

2) Whole Life Policy: In this type of life insurance policy, the insured sum will only be paid to the named beneficiary and is only due upon the insured’s passing. Some insurance policies require that the premium be paid for the duration of the policy, but others may only allow for payments to be made every 20 or 30 years.

3) Endowment Insurance Policy: The endowment policy comes with the additional benefit that the policyholder will receive a lump sum amount in case he survives until the date of maturity, which is the only distinction between the term insurance plan and the endowment policy. The remaining terms of a term policy are the same and likewise apply to endowment policies.

4) Unit Linked Insurance Plan: In addition to providing life insurance, these plans allow policyholders to accumulate wealth. Such products also serve as investment instruments. In this policy, your insurance coverage is paid for in part by your premium. The balance is put into debt and equity investments. In the event of your passing, your family will be given a lump sum payment.

5) Money Back Policy: The primary distinction and benefit of a money-back policy is that it offers the policyholder various survival advantages that are correlated with the policy’s duration. This policy offers you money throughout the policy time, unlike other policies. No matter how many payments have been made, the family of the policyholder who passes away receives the full amount. When compared to their competitors, these insurance are pricey.

6) Pension/Annuity Plan: According to the terms of this insurance, the money paid in premiums is accumulated as assets and transferred to the policyholder as income via annuity or lump sum, as directed by the insured. This plan helps in building the retirement plan.

Everyone knows that the future is unknown, thus even if nobody wants anything bad to happen to them, we should all be ready for unforeseen events. A life insurance policy is a financial safety net that guarantees your family’s security. Therefore, the cost of a life insurance policy is extremely little compared to the increased level of peace of mind it will provide.

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