Are you concerned about how to protect your family’s financial future? Do you want to ensure that your hard-earned money is working for you, even after you’re no longer around? Life insurance can be the answer you’re looking for. It’s not just a tool to provide financial security for your loved ones; it also offers a multitude of benefits that can help you achieve your long-term financial goals.
In this article, we’ll explore what life insurance is and delve into the top 5 advantages of including it in your financial plan. By understanding these benefits, you’ll be equipped to make informed decisions about securing your future and protecting those who depend on you.
1. Financial Protection for Your Family
The primary benefit of life insurance policy is providing financial protection for your family in case of an unfortunate event, such as your untimely demise. The death benefit received by your nominated beneficiaries can be used to cover various expenses, including mortgage payments, children’s education costs, daily living expenses, and even funeral expenses. It ensures that your loved ones can maintain their standard of living and achieve their goals even after you’re gone.
2. Guaranteed Returns
What is life insurance? It is unlike other market-linked investment options with uncertainties and risks. Life insurance savings plans offer guaranteed returns at the end of the policy tenure if the policyholder survives this term. These plans provide certainty in terms of the maturity benefit payout amount which is disclosed at the time of purchasing the policy. This transparency enables you to plan your finances better and align them with your long-term goals.
3. Customisable Plan Options
Every individual has unique financial goals, priorities, and capabilities. Life insurance savings plans offer flexibility and customisation options to suit your needs. You can choose the death benefit sum assured, premium payment frequency, premium payment term, and policy term according to your financial situation.
Consider this scenario: Ms Gupta is a 35-year-old working professional who wants to create a comprehensive financial plan for her family’s future while ensuring protection during unforeseen circumstances. She opts for a life insurance savings plan that allows her to customise various aspects of the policy as per her requirements. She chooses a higher sum assured, as she wants to provide significant financial security for her family. Additionally, she selects a longer policy term and premium payment term that aligns with her long-term savings goals.
4. Tax Savings
Life insurance savings plans offer tax benefits under section 80C of the Income Tax Act in India. The premiums paid towards such plans are eligible for deduction from your total income up to ₹1.5 lakhs in each financial year. This deduction reduces your taxable income and consequently decreases your tax liability.
Furthermore, under section 10 (10D) of the Income Tax Act, any death benefit payouts and maturity benefit payouts received from life insurance policies (with annual premiums up to ₹5 lakhs) are entirely tax-free.
Let’s understand this with a hypothetical scenario: Mr Verma, who falls in the highest tax bracket, invests in a life insurance savings plan with an annual premium of ₹2 lakhs. By doing so, he can claim the entire premium amount as a deduction under section 80C. As a result, his taxable income is reduced by ₹2 lakhs, providing significant tax savings.
5. Option to Avail of a Loan against the Policy
Apart from being an excellent income tax saving option, life insurance savings plans can also come to your rescue during financial emergencies. You can avail of a loan against your policy from the life insurer. The interest rates on such loans are generally lower than unsecured loan options since they are secured against your policy.
For instance, you face an unexpected medical expense and require immediate funds. Instead of opting for high-interest personal loans or liquidating your investments, you can explore the possibility of taking a loan against your life insurance policy. This allows you to access the required funds at a favourable interest rate and without disturbing your long-term financial plans.
Conclusion
By including life insurance in your financial plan, you can enjoy multiple benefits that provide both protection and growth opportunities. It offers vital financial security for your family’s future and ensures their needs are taken care of even in your absence. With guaranteed returns, customizable options, tax savings, and the ability to avail of loans against the policy, life insurance is an essential tool to safeguard your financial well-being.
As you embark on your journey towards financial planning and securing a better future for yourself and your loved ones, consider integrating life insurance into your portfolio. It not only offers protection but also acts as a catalyst for achieving your long-term financial goals. Remember, investing in life insurance while young and healthy allows you to take advantage of lower premiums and reduce your overall costs significantly. Start building a solid foundation for your financial future today.
