Life insurance has emerged as the most preferred investment option for Indian households with an income up to Rs. 25 lakh. According to theDSP BlackRock India Investor Pulse Survey, 70% of the affluent Indian population, holding investments other than cash, has parked money in insurance. Here are a few benefits of life insurance that have made it a preferred financial vehicle.
1). Life Cover
The main purpose of buying life insurance is financial protection for your family in your absence. A life insurance policy is the basis of a good financial plan, especially if you are the primary earning member of your family.
An ideal policy offers your family an adequate cover to live comfortably and maintain their standard of living. If invested smartly, it can even help fund future financial needs like child education, etc.
2). Coverage of Health Expenses
Your life insurance policy also protects you financially from expenses and losses arising from critical illnesses. Riders are available to hedge the risk against illnesses like some types of cancer, and first heart attack, stroke, and to cover the expenses for surgeries like open chest CABG, etc. The benefits vary from policy to policy.
3). Retirement Planning
While insurance covers the risk of a sudden death, there is also a chance you may survive your tenure and are left to tackle post-retirement expenses. This can be a challenging task due to the lack of steady income. A life insurance pension plan can offer you a steady source of income in the form of annuities that make it easy to handle your post-retirement expenses.
4). Tax Planning
A common concern on the minds of every investor is – how do I save tax? If invested wisely,insurance can be a great tool to save tax. The premiums paid towards your life insurance policy are deductible under section 80C, while contributions made towards your pension plan are deductible under section 80CCC.However, there are certain annual limits to these deductions and the benefits can vary as per the provisions of the Income Tax Act. Consult your tax advisor for detailed advice.
Have you ever wondered why you are asked to pay lesser premium than your friend or family member? To end the confusion, we have prepared a list of factors that affect how life insurance premium is calculated.
Awareness is the first step towards making effective decisions. Appreciating all the nuances of a powerful financial product like a ULIP will help you to decide the perfect plan for you.
The scope of an insurance policy is sometimes not sufficient to ensure your family’s financial security. However, you can fortify your insurance plan by buying an additional cover for extraordinary circumstances. These add-ons are called riders.
Loan against insurance policies is a good option in case funds are required in an emergency situation and can be a better alternative to a personal loan or a credit card loan or asking friends/relatives for financial help. But are they always a good idea?