According to a report published by the research and analytics business, Benori Knowledge, India holds the 10th position in the world’s life insurance industry with a penetration rate of 3.2%. According to the survey, India’s life insurance penetration rate increased from 2.8% in December 2019 to 3.2% in December 2021, nearly matching the 3.3% global average.
The Covid-19 pandemic has given us the opportunity to have some difficult conversations. Although death is an inevitable part of our transitory world, no one wants to talk about it. Life is fleeting and unpredictably variable. Thus, life insurance will enable you to safeguard the future of your family even after your passing. Here are several reasons why life insurance is necessary for sound financial planning.
What is Life Insurance?
A life insurance policy is a contract that binds the insurance company and the person who is insured. It binds the insurance company legally to pay benefits for the policyholder in the case of their demise. The pre-set sum assured will be paid to the nominee of the life insurance policy on behalf of the insured. Simply put, life insurance gives financial support to the family on the policyholder’s demise.
Why Your Financial Planning is Incomplete without Life Insurance:
1. Helps Protect Your Family
A major concern of a sole breadwinner of a family is their family’s financial security. It hurts to think of what would happen to them without you or how they would maintain their financial stability in the event of the unthinkable. Life insurance works as an aid to this ache as it will ensure that your family has a consistent and reliable source of income.
In order to support your family in living their lives without you, they will get a monthly payment through the chosen life insurance policy. These payments can be used to support your spouse in running the household or to support your children in continuing their schooling.
2. Safeguards Your Assets
Everyone wants to revel in life’s luxuries, especially those that they can enjoy with their family. Even so, there are occasions when these frills come at a price, like EMIs. It doesn’t pose any major issues as long as you are around to pay them off on time. But who would be liable for paying off these debts and liabilities in the event of your death?
A life insurance policy is a straightforward solution. The sum assured might be used to settle debts and expenses. By doing this, you can fulfil such financial commitments on time without having to forfeit any of your assets.
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3. Sustains Financial Corpus
As was previously noted, over the past few years, life insurance has become increasingly popular in India. It is because life insurance provides policyholders with investing alternatives. You have the option of achieving your long-term financial objectives or accumulating wealth for retirement with certain types of life insurance that provide survival benefits.
Insurance and investment options are enhanced by the best investment plan in India, like ULIPs. You can invest based on your risk tolerance while still taking the necessary precautions to secure the future of your family and yourself by getting insured.
4. Provides Financial Immunity Against Critical Illnesses
As one ages, they tend to be more prone to illnesses and diseases that are, at times, life-threatening. In such situations, it becomes increasingly difficult to hold oneself together to accept what is happening while simultaneously having to worry about the looming fear of a hefty medical bill.
Nevertheless, if you are insured against critical illness in your life insurance policy, you need not worry about medical expenses. It would be covered by your insurance policy and enable you to make cashless payments when the time comes. Therefore, life insurance provides immunity against critical illnesses.
5. Offers Tax Benefits
Life insurance is a smart plan and the best investment plan in India that helps save taxes. Under Section 80C of ITA, the premium the policyholder pays for the life insurance policy is entitled to a tax deduction of up to Rs 1.5 lakh each year. In addition, Section 10 (10D) of the Income Tax Act exempts the sum received upon the death of the policyholder from taxation.
Final Thoughts
Life insurance policies play a vital role in financial planning for a secure future for you and your family. If you are the only provider for the family and have not considered what would happen if the worse happens, you should consider giving it a thought now. Since nothing in life is given to you out of the blue, planning for a scenario without you in the picture is as difficult as it is necessary for your financial planning. You need to work for things early on because, as Nike Thaddeus put it very correctly, “The seeds we sow today will grow to serve as shades for weary travellers tomorrow.”
