Grace 39-year-old Mohan was a reputable MNC employee who had a successful record. He used to live with his parents, his wife, as well as two young children. With a substantial income, he used to be able to provide for his family in a way that they were happy and content.
Unfortunately, Mohan developed a heart problem and passed away due to a sudden cardiac arrest. He was the sole earner of his family, and he left behind a financial corpus. However, this corpus was not sufficient for his family to lead comfortable lives and not worry about regular expenses.
If you want to avoid such a situation where what you leave behind for your family is insufficient for them, or want to create a substantial corpus so your loved ones could lead comfortable lives, consider life insurance. Had Mohan gotten himself a life cover, his family may have been able to live without financial worries after he was gone.
Keep reading to know about the benefits of buying a life policy.
Understanding the meaning
Life insurance is a type of policy that offers you a life cover so that your family is financially protected against uncertain circumstances. The insurer offers you a sum assured in lieu of the premiums paid by you as part of the policy. If you were to face an unfortunate incident covered by the policy while it is in force, the insurer will compensate your family with the sum assured in the form of a benefit. Some policies, such as ULIPs, also allow you to invest your premium in market-linked funds and earn returns to increase your wealth.
Benefits of a life plan
The following are the benefits of buying a life insurance policy:
- Sum assured
Sum assured is one of the primary components of a life plan. It is the amount paid to the nominee in the event of an unfortunate circumstance affecting the life assured. The sum assured given under the policy is paid to your family as death benefit. If there is any bonus involved, that will also be paid along with it. Bonus depends on the type of the policy. The death benefit can be claimed as a lump sum or monthly benefit.
- Financial stability
The main advantage of life insurance is providing with financial stability to your loved ones. If a crisis puts your family in jeopardy, and leaves them with no regular income, the family may soon face a financial crisis. The policy ensures that your loved ones do not have to go through financially dire situation. The money received as benefit can be used to take care of regular expenses. It can also be used to fulfil goals in the future.
- Tax benefits
Apart from death benefit or any maturity benefits applicable, you also get to take advantage of tax benefits with the policy. The premiums paid under the life insurance policy are eligible for income tax deduction under Section 80C of the Income Tax Act. You can avail of a maximum tax deduction of Rs. 1.5 lakhs. If there are maturity benefits offered in the policy, they may also be eligible for tax deduction under the old tax regime. The deduction limit depends on the policy.
- Riders
You can avail of additional coverage in the form of riders. These are add-on features that allow you to increase the scope of the policy and get comprehensive coverage. Coverage against personal accident, waiver of premium payments, critical illness and loss of income due to a disability are some of the riders provided under the policy.
- Loan security
If you have any planned expense such as the purchase of a new home or sending your child abroad for higher studies, you can get financial help with your life insurance, meaning it can be used as a collateral. The option may not be available for all policy types, or across all insurance providers. Do keep in mind that the value of your policy needs to match your loan amount requirement.
- Covers liabilities
The benefit that your family receives from the policy can be used to take care of any outstanding loans or debts that you may have taken. This allows them to remain financially safeguarded from any instability that could have taken place due to the repayment of the loan or debt.
Conclusion
These are some of the upsides of buying a life policy. Before you purchase the policy, make sure you use a life insurance calculator to get an idea about the cost of the policy as per requirements.
