Life Insurance is Something that You Can't Ignore

On March 12, 2015, the Government of India passed an Amendment to the Insurance Laws Bill, increasing the FDI limit within the Indian insurance sector from 26% to 49%. According to Timetric’s report, “Life Insurance in India, Key Trends and Opportunities to 2019,” this increased FDI allowance is likely to attract global insurers to the country, intensifying competition within the industry. This can only mean good news of buyers of life insurance in India. In the race to win customers, insurers are likely to try to outdo each other in the benefits they offer policy holders, while lowering premium amounts. There could never have been a better time to invest in protection for yourself and your loved ones. Here are some more reasons why life cover is one investment you should not ignore.

Does Life Insurance Really Help?

While most of us are aware of the death benefits that life insurance plans offer, the reality is that such cover also offers a lot of advantages for the living.

·         Tax Benefits: Buying whole life or term cover is an excellent way to save on taxes. The premiums you pay are tax deductible under Section 80c of the Income Tax Act to a maximum of Rs 1.5 lakhs. Maturity benefits are also tax free under Section 10(10D) and Section 10(10A)(iii) of the Income Tax Act of India.

·         Retirement Planning: If you want to continue to maintain your standard of living even when you are no longer actively employed, you need to start planning early and build a corpus. A life insurance policy can help you with disciplined savings for life after retirement. You pay the premiums while you earn and reap the benefits post retirement.

·         Diversifying your Investment Portfolio: With a good mix of high, low and medium risk investment vehicles, you can be sure that you have a well balanced portfolio that can withstand even a volatile economy and the ups and downs of the markets. For those with lower risk appetite, life cover could be a good option to add to one’s investment portfolio.

·         Loans and Loan Repayment: Did you know that you can use your policy as collateral when you apply for a loan? So, not only does life insurance in India help you save, it can help you get funds when you need it the most. In addition, this is one investment instrument that can also help you repay for loans or help your family repay any debt that may outlive you.

·         Peace of Mind: Not only for you but also for your loved ones, knowing that you have planned ahead to ensure that the family remains financially secure even under the most unfortunate circumstances can do a lot to relieve stress. It also works wonders on strengthening the bond in relationships, knowing that you care enough to make sure that even when you aren’t there to take care of them, you will actually be taking care of them through a good policy.

The gains on life insurance explained

Taking life insurance in today’s turbulent times is not just an intelligent move, it is an essential one. All we have any reasonable control over is our present. The future may bring with it tremendous joys in the form of our children topping their schools and college exams, an unexpected windfall or even a surprise trip to Europe on your 50^th birthday. But the future can also come with tremendous lows, such as the unexpected death of a loved one or the loss of a stable job.

But life insurance can, if not entirely pre-empt, considerably nullify the effects of these future calamities. By playing the insurance game intelligently, you can make your life insurance policy work for you at maturity. Here’s how:

* Choose a maturity date based on future life goals. At your current position in life, you may be looking at financing your child’s foreign education 15 years hence. Or you may be at a mid-career phase and looking to retire in 10 years. Are you certain that you will have enough financial resources to mark these major milestones? If not, you can choose life insurance plans for 10, 15 or 20 years that provide a large corpus on maturity, just in time to send your child to college or for you to set funds aside for your retirement.

* The plan can finance future dreams. In the race of life, you may need to sacrifice your own small joys to help your loved ones realise their dreams. At the start of one’s career, especially, one does not have a very high salary to finance such activities as annual vacations and regular expensive purchases. But a life insurance policy maturing after a certain number of years can provide the money to finance the dreams you are putting off for later.

* Your loved ones are cared for even in your absence. The best laid plans can go awry in the case of your unfortunate demise. Your endowment life insurance takes away the worry of future financial insecurity. If the policy holder passes away before the policy matures, the death benefits accrued over the policy are passed on to the holder’s family. So whether you are present in their life or not, your loved ones are assured of a stable living.

* It creates a sizeable corpus for parents. Our parents sacrifice everything to raise us, and they continue to give their time and effort even when they are in their autumn years. Taking life insurance plans in their name for a certain number of years can guarantee a corpus for them when the policy matures. They need not depend on anybody for their upkeep in their old age – the policy you take in their name will keep them in good stead.

Despite the many advantages of investing in life insurance in India, several people continue to subsist without it. Not taking life insurance is like living with a constant threat of financial insecurity every day. Unless you have a lot of money saved up in the bank and have some high yield investments, your family is completely unprotected against future monetary shocks. In your absence, your loved ones are left to fend for themselves – and it’s a cruel world out there. Instead, taking life insurance plans is the way forward.