India’s life insurance penetration in FY 2020-21 is pegged at just 3.2%, states an IBEF report. This means that at least 100 crore Indians are not covered by any form of life insurance. And the ones who have life insurance policies have inadequate coverage. Analysis shows that India’s protection margin of 92.2% is the highest in the Asia-Pacific region. This means that a person has savings and insurance of less than Rs 8 for every Rs 100 needed. This gap is largely attributable to the lack of awareness about the benefits of life insurance. Here we outline some reasons for buying a life insurance policy.
# Ensuring the Financial Security of Your Loved Ones
Life insurance is an effective tool to ensure the financial protection of your loved ones in case something happens in the future.
# Peace of Mind
Having a life insurance policy is good for your peace of mind. You can be assured that in case something happens to you, your loved ones will not have to suffer financially.
# Achieve Long-Term Goals
One of the main reasons to go for life insurance is that the maturity amount allows you to fund a variety of goals. The maturity pay-out can be used to fund the purchase of a home or a car or fund a child’s education or marriage. The use of a calculator is recommended for finalising the policy and the premium amount that fits into your budget.
# Dealing with Loans and Other Borrowings
Another compelling reason to buy a life insurance policy is that the maturity amount or the death benefit allows your family to pay off any outstanding debt that you may have. It could be a house loan or a car loan or borrowings taken to fund any other purchase.
# Supplements Income at Important Stages
Certain plans have a money-back feature that involves payment of the maturity amount in instalments at pre-specified duration. You can go for policies that entail payments when your child reaches 18 or 21 or you are at a stage when you need funds to make specific payments.
Life insurance premiums are eligible for tax benefits allowing you to reduce your taxable income. You can buy life insurance online or offline direct from the insurance company or its dealers.
# Inculcate a Habit of Discipline in Your Finances
Taking a life insurance policy means you have to keep aside a specific amount every quarter or year to pay the premium. This leads to disciplined spending and saving so that you can pay your premiums on time.
# Helps in Wealth Creation
Apart from providing financial protection to your loved ones in case of a mishappening, several life insurance policies offer you a chance to create wealth through investment in varied instruments. Choosing a policy that uses a portion of your premiums for investment in equities or debt or a combination of both will help you create wealth that can be used for many purposes.
# Premiums Increase with Age
Buying a life insurance policy at younger age is recommended as it allows you to get better coverage by paying lower premiums. The premium amount depends on your age and health at the time of taking a policy.
#Coverage for Critical Illnesses
Apart from offering life insurance coverage, several insurance plans allow you to buy riders that offer coverage for expenses arising due to a critical illness.
Life insurance offers several benefits and so should form an essential part of your financial planning strategy.