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The one thing that everyone can be certain about is the unpredictability of human life. The unexpected loss of a family’s primary earner may come as a big blow to the family. While the emotional distress associated with the loss of a family member can never be compensated, the financial impact of losing the primary earner can be minimized with the help of life insurance. A life insurance plan is something that provides benefits against the death of the insured person. In case of an unforeseen eventuality, a life insurance policy ensures adequate protection for the insured’s dependants by paying a lump sum amount that can be used for the family’s future financial requirements.
Despite the importance of life insurance in protecting a family’s financial interests, its overall penetration in India is still relatively low. According to an estimate, India’s life insurance penetration is less than 3%, which makes it worse than the global average of 3.47%. Low awareness is often attributed to be the reason behind this scenario. Even among the educated population of the country, awareness about life insurance has not yet fully reached. If you are someone who thinks that life insurance is just another expense, this article is just for you. Buying a life insurance policy could be one of the best decisions you could make in your life. Here is list of 10 reasons as to why this is such a big deal:
Running a family is not an easy thing, especially after the unexpected death of the primary earner. The day-to-day living expenses of a middle-income family could run up to a few thousands every week. Under these conditions, a family is likely to face a tough situation without the earnings of the breadwinner. The compensation received from a life insurance policy will help a family sustain its livelihood and provide adequate financial security.
Expenses incurred for children’s education is one of the crucial things one has to consider while subscribing to a term insurance plan. The cost of education is getting higher every year, and this must be factored in while determining the sum insured amount. It would also help if an add-on cover is chosen for covering children’s education expenses. Without the income of the primary earner, a family is likely to have a tough time when it comes to paying for children’s education expenses. A life insurance cover could make a huge difference in achieving this crucial financial goal.
Most of the young professionals living in urban areas have life insurance coverage from their employers. While this is certainly beneficial, it may not be adequate to sustain a family’s financial requirements for life. Moreover, employer-provided insurance remains active only as long as a person remains in that job. If the employee gets laid off or quits the job, the insurance coverage will be terminated immediately. It is never a good idea to solely rely on the life insurance cover offered by an employer.
Most middle-income families in the country have to deal with the burden of loans and debts on a monthly basis. Following the loss of the family’s primary earner, these loans are likely to pile up into huge financial liabilities over a period of time. The proceeds from a life insurance policy will help a family take care of these financial liabilities.
Most young people postpone taking a life insurance cover on account of being single. Being single is not an excuse to postpone a term insurance plan. Even if you are single, you might still have aged parents to care for. Moreover, the death of an individual is often accompanied by expenses such as funeral costs, student loan repayment, other debts, etc. If you don’t want this burden to fall on your survivors, it is better to have a term insurance plan.
Some people are of the opinion that life insurance is required only after an individual crosses a certain age. This is most certainly not true. Young age is the best time to buy a term insurance cover. Term insurance plans are cheap when a person is young since young people are perceived to be healthy by most insurance companies. Most importantly, the premium cost will not increase as the individual ages. Hence, it is better to buy a term insurance cover as soon as possible.
If you feel that a basic term plan or endowment policy is not adequate for your requirements, you can always subscribe to additional rider plans and enhance the level of protection offered. There are multiple rider options including critical illness coverage, personal accident death cover, personal accident disability cover, waiver of premium cover, etc. In addition to enhancing the protection offered, these riders will also help you prepare for contingencies in which you could lose your income during life.
Life insurance coverage comes in different forms. A term plan provides coverage only against death. There are also ULIPs and endowment plans to provide investment options for policyholders. In these investment plans, a portion of the premium will be invested in the market and the proceeds will be paid to the insured at the end of the policy period. For those who wish to have life insurance coverage and investment options under a single policy, these plans are worth having a look.
If the insured is a business person, his/her untimely death can have a devastating effect on the business. There are policies specifically available for business people to protect their interests even after their death. Following the death of a partner, life insurance ensures the continuation of the business through the surviving partner while adequately compensating the insured’s family or nominee.
It is not a good idea to take life insurance coverage just to obtain tax benefits. The tax benefits available for a life insurance cover must be viewed just as a bonus benefit. The premium amount paid for life insurance is eligible for tax relief as per Section 80C of the Income Tax Act. Moreover, the proceeds obtained from a life insurance cover are also eligible for tax relief as per Section 10D of the Income Tax Act.
In addition to all the benefits listed here, life insurance also brings much needed peace of mind to an individual. It is absolutely necessary for an individual to have some kind of security to protect the family’s financial interests following his/her untimely death. Life insurance offers this protection and prevents a family from dreadful financial consequences. While untimely death cannot be predicted by anyone, the financial impact can certainly be avoided with a comprehensive life insurance cover.
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