4 Key Life Insurance Benefits to Consider

The Covid-19 pandemic was a jolting reminder of how unprepared we were for life’s unpredictability and fragility. Remember how we all felt thrown off balance when the world plunged into that health crisis? 

Many of us were left financially scrambling since we lost family members we were economically dependent upon. 

This brings to light the importance of financial protection and readiness. A life insurance plan is one tool that helps you prepare for life’s uncertainties. However, only approximately 2.9% of India’s population has tapped into this financial safeguard. It boils down to a lack of awareness about the benefits of life insurance and a widespread misconception that life insurance premiums are just another annual expense. 

Consider this scenario : Raj bought life insurance early in his career. When he suddenly passed away, the policy ensured his family didn’t face financial hardships. The lump sum amount received as the death benefit of the life insurance plan helped the family pay off liabilities like home loans. It helped his daughter continue her education at one of the most prestigious colleges in India. Raj’s foresight and planning meant his family could maintain their lifestyle and stay financially stable even in his absence. 

In this article, we’ll explore why having an insurance policy is essential and why life insurance should be an indispensable part of your financial plan, as it did for Raj and his family. 

Why Buying Life Insurance is a Good Idea?

Life insurance offers a range of benefits that secure your family’s financial future. Understanding these critical benefits can help you choose the right plan for your financial needs:

1. Financial security 

The first and most significant life insurance benefit is its ability to provide financial security to your loved ones. In the unfortunate event of your unforeseen demise, the last thing you want is for your family to struggle financially. Life insurance ensures your family receives an assured sum to maintain their living standard. 

Further, life insurance helps your loved ones manage ongoing expenses such as debt repayments. It can protect your kids’ education, your spouse’s lifestyle, your old parents’ healthcare, your family’s financial security and overall your dreams and aspirations, which you had for your family even in your absence. 

2. Tax benefits 

In India, life insurance policies offer tax deductions under the Income Tax Act. For starters, your premiums for your life insurance policy qualify for a deduction of up to ₹1.5 lakhs under Section 80C.

Additionally, the income you receive from your life insurance policy, whether maturity or otherwise, is exempt from tax under Section 10(10D) of the Income Tax Act. Also, if you’ve added riders to your policy, like critical illness cover ; these premiums can also fetch you deductions under Section 80D.

3. Collateral 

Life insurance can also be used as collateral when you want to take out a loan. This is done through a process called collateral assignment of life insurance. In this case, you can use your policy as collateral and for the duration of the loan, your lender would be the beneficiary of your life insurance policy. 

If, unfortunately, you pass away before the loan is fully repaid, the lender has the right to claim the death benefit to repay the outstanding balance of your loan. This way, you can prevent the loan from burdening your family. 

4. Plan versatility 

Life insurance isn’t just a one-size-fits-all solution. It is highly versatile, catering to policyholders’ diverse needs and life stages. There is a wide range of policies, such as term life insurance for pure protection, whole life insurance for lifelong coverage, endowment plans for savings plus insurance, and unit-linked insurance plans (ULIPs) for those who want a mix of insurance and investment.

Each of these types comes with its own set of features and perks. This allows you to choose a plan that aligns with your needs, goals and risk appetite. Some life insurance policies offer benefits like covering medical expenses, funding your child’s college education, or even supplementing your retirement income.

Key Takeaways

Beyond preparing for the unexpected, life insurance benefits include peace of mind, knowing that you’ve created a safety net for your loved ones. Therefore, it should be an integral part of your financial planning, laying the groundwork for your family’s future. 

Furthermore, make your life insurance purchase experience seamless and hassle-free with platforms like PhonePe!