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Life runs on uncertainty where medical emergencies or accidents can put monetary pressure on families. Hence, every individual must financially secure their family’s future by purchasing a life insurance policy.
Life insurance is a contract between an insurer and the policyholder where the former promises to pay a fixed amount to the family after the insured’s death. Apart from providing financial security, individuals need life insurance for several reasons. Want to know about the reasons? Read along!
Below are discussed several reasons that substantiate the importance of life insurance for an individual irrespective of age.
Life insurance policies are comparatively cheaper than the other insurance variants. Therefore, starting an insurance policy earlier will make the complete ordeal affordable.
Ideally, buying a policy at a young age will make the premiums cheaper as the insured is healthy. The workable years also impact the premium rates.
Since a life insurance policy is for a longer period, the coverage will be higher. It is always beneficial to compare the policies and the insurance companies before making the transaction.
Digging the internet about the importance of life insurance?
Life insurance policy doesn’t limit itself to securing the insured and his/her family’s life; it also helps them make significant savings. Section 10D and 80C of the Income Tax Act offers tax exemptions on the premiums paid.
Both of these are applicable if the premium paid in an FY is within 10% of the total sum assured.
A taxpayer can easily secure their life and save significantly by claiming these exemptions.
Buying life insurance is essential as it can help an individual plan his/her retirement. Individuals can invest in a protective cover when they are younger or have started earning to target long term gain.
Buying an insurance plan in young age levies a lower premium cost. One can thus keep their investment plan in place by choosing the compatible payment such as quarterly, monthly semi-annual, or annual fee.
This fund will support the retirement expenses such as medical emergencies, managing increasing lifestyle expenses, inflation, etc.
Ensuring the family’s financially secured future substantiates the need for life insurance. A family depends on the earning member significantly.
This dependency continues even after that earner has expired. Hence, insuring one’s life would support the family members to survive after the insured’s death. They will receive a lump sum amount to secure their financial needs.
Hence, the insured person aids his/her child to pursue education, support the spouse to manage the expenses, etc., even after his/her death.
Many life insurance policy plans also offer loans. This credit against the base insurance plan works as an alternative against personal loans.
One can take a loan against the capitulated value of the insurance plan. However, it isn’t applicable for term insurance.
The term insurance expires at the end of the term without making returns and doesn’t have any cash value.
Many insurers allow the insured to take a loan if they have paid premiums for three consecutive years.
However, the availability of loans on life insurance is subject to an insurance provider’s terms.
The scope for building cash value is a reason why life insurance is essential. Individuals can choose whole life insurance that offers permanent coverage till an insured cancels the policy.
This insurance policy allows an individual to build cash value gradually. This would also help understand the ways to save more on income earned.
This cash value will act as a financial backup for future needs. In addition, an individual can depend on it during medical emergencies.
Life insurance can be an excellent way to secure one’s business. This policy ensures both a business owner’s and his firm’s future.
For instance, if an individual owns a business with a partner, the partner can easily purchase the portion of a company without hassle.
The business partner will enter a buy-sell agreement, and a secured amount would go to a deceased partner's nominees. However, they won’t get a stake in the company.
Life insurance can be a form of investment toll for some. The universal life policies are tied to a specific investment product. Ideally, a policyholder receives dividend payments as per product’s performance.
However, it is essential to read through terms and conditions before purchasing a product. This would ensure that a buyer knows potential returns and risks before commitment.
An individual can easily start investing based on a chosen plan. This amount would accumulate gradually and help an individual financially secure in emergencies.
Additionally, they can make healthy savings on the right plan.
Just as life is unpredictable, lack of finances can accumulate unwanted debts. An earning member can gradually clear these burdens. However, his/her death would shift the burden on the family.
For instance, an insured and his wife availed a home loan for a set tenure. The repayment burden would now shift on the spouse. If the spouse isn’t financially capable, creditors will sell a borrower’s belongings.
Life insurance would help the nominee manage these debts. Insuring a substantial sum would help a family receive a significant amount to clear dues and secure certain funds for the future.
There are also chances of facing estate taxes after an insured passes away. These payment obligations have to be met by heirs.
These taxes include inheritance taxes on assets or properties. Securing a life insurance policy would ascertain that loved ones receive a sufficient amount to pay off a hefty tax bill.
These points explain the importance of life insurance for an earning individual. The ultimate benefit of life insurance is peace of mind.
An individual is confident that his/her loved ones can sustain their livelihood even after an insured’s demise.
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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