What Are The Advantages Of Purchasing A New Life Insurance Policy?

Many people in India ignore buying an insurance policy because they think it is an unnecessary investment until a sudden mishap or accident brings them to realize the importance of it. Life can be quite unpredictable, and although you cannot predict uncertainties, you can be well prepared to deal with it. One of the best ways to cope with the uncertainties of life and ensure that your loved ones are protected financially in the face of adversity is to invest in a good life insurance policy.

Advantages Of A Life Insurance Policy

Apart from financial security and protection, there are many other life insurance benefits, which are discussed below:

1. Death benefit

In case any unexpected thing happens to the insured, which results in the loss of income for their family, the insurance company provides compensation in the form of the death benefit. The appointed nominee receives the full sum assured plus the bonus accrued over a period.

Apart from providing protection against death, many life insurance policies provide the benefit of monthly income, which is a great boon for old-aged people or people who are nearing the retirement age and have diminishing income. While purchasing a life insurance policy, make sure that you compare the features and benefits of different policies and choose the one that best suits your needs so that you get maximum protection.

2. Valuable return on your investment

Several financial advisors in India suggest that everyone must invest in a life insurance policy not only to provide your family with the financial protection when you are not around but also from the perspective of gaining valuable returns from the investment. Many life insurance schemes in India offer a decent recent bonus in the form of a bonus that no other investment tools offer.

Also, life insurance is a safe investment tool as compared to other investment options. The money you invest in your policy is returned to you in full as the sum assured at the end of the term or after the demise of the insured.

3. Tax Benefits

One of the many advantages of life insurance is that it provides many tax benefits. If you are a salaried employee and have purchased a life insurance policy, you can claim deduction under Section 80C. Currently, under this section, you can get a maximum tax deduction of Rs. 1, 50,000.

4. Availability of loan

In the event of any emergency where you need money desperately, you can take advantage of your life insurance policy and take a loan against it. Today, almost all the major insurance companies in India provide loan facilities to the policyholders. You can borrow a certain percentage of the cash value of the policy, or the sum assured depending on the policy provisions. Make sure that you check with the loan policies with the insurer before you subscribe for the policy.

5. Aids in financial planning through different life stages

Planning your finances well through different stages of life is paramount. This is where life insurance can play an important part. You can leverage the benefits of term life insurance and make provisions for financial support to your family in the event of your sudden death.

This will not only help them cope with the financial obligations well but can also help them live a financially independent life without having to compromise on their lifestyle. Also, by investing in a life insurance policy, you can meet your various future goals like child marriage, paying your child’s education, building a dream home or building a corpus for post-retirement life. Make sure that you choose the right insurance policy that suits your needs.

6. Guaranteed income

Your family feels secure because you bring in regular income to cater to their needs. The income you earn aids in paying the loan (if any), rent, daily bills, child education and other household expenses. Certain life insurance policies provide regular pay-outs, which can compensate for the loss of income due to the death of the family’s earning member.

7. Additional coverage

Many insurance companies in India allow the life insurance policyholders to purchase additional cover, over and above the default coverage included in the policy. This additional coverage is called riders. The riders allow you to increase the coverage and get comprehensive coverage against risks that may not be included in the main scope of the life policy.

The riders may include coverage against personal accident, waiver of premium payments, critical illness, loss of income due to a disability, etc. The additional coverage can also help you get tax benefits that are in line with the life and health insurance policy. For example – if you have opted for a critical illness rider, you can claim deduction on the premium under Section 80D of the Indian Income Tax Act.

8. Security of business

There are a few life insurance companies in India that give an option, wherein if you have bought a policy and run a business, then your partner can purchase a share of the policy holder’s after the death of the policyholder. In this case, the business partner will have to sign an agreement with the life insurance company and the pay-out received after selling the share will be given to the appointed nominee. However, you must know that the dependent or the nominee of the policyholders do not get any stake in the company.

Conclusion

All the life insurance policies do not provide comprehensive coverage; there are bound to be certain exclusions. For example, your insurance policy may not cover loss of life due to drug overdose or involvement in criminal/illegal activities. In such cases, depending on the type of insurance policy you have purchased and your needs, you may have to buy an additional rider to increase the coverage. The riders will automatically increase the premium amount.

Also read- Here Are Some Frequently Asked Questions About Life Insurance Riders.

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