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Life Insurance is a Very Good Gift to Give Your Family This New Year

Updated on March 2, 2016

Life Insurance

Life Insurance is a Good Gift to Give Your Family this New Year

If you are still wondering whether you should take on a life insurance policy, a story by the Assistant Editor of Learn Vest, Alden Wicker, published in Forbes, will definitely move you. In the article, he recounts his own experience, when at the age of 3, he lost both parents on the same day. The only thing that helped his grandparents ensure a good upbringing and education for Wicker was the life insurance policy his mother had taken only months earlier.

Given that India has the dubious recognition of being the country that tops the global list for the most deaths related to road accidents, even young families cannot be complacent that there is a long way to go before they need to start planning about their loved ones’ future. In fact, life insurance plans in India are recommended as early as possible, to ensure the maximum benefits at the lowest possible premiums. Here are some reasons why you should consider giving your family the gift of financial security this New Year.

Life is Uncertain

How often have you heard it said that the only thing certain about life is uncertainty? Accidents happen and they could lead you to become unable to provide for your family’s financial needs, either due to disability or due to death. The benefits offered by life insurance plans can help you loved ones pay off debts, take care of death duties and hospital bills and even the cost of educating children, according to Futurity First. In short, you make life easier for your loved ones even when you are no longer there to take care of their needs.

Provide for Loan Repayment

These days, you can’t realize most of your dreams without the help of some sort of loan. However, what happens to the repayment process if something were to happen to you? Debt could be a huge burden for a family coping with the loss of a loved one, especially if that person was also the breadwinner. A good way to avoid increasing the trauma for a family already coping with loss is to choose the right life insurance policy for your needs. In addition, you could even use this policy to draw a loan against it, using it as collateral, says Yahoo Finance.

Illness & Disability

Death is difficult to deal with but a terminal illness or an accident that leave one disabled could be a long-term stressor, as well as a financial burden. This is where life insurance in India comes to your rescue. With the right riders, you can have a comprehensive policy that helps pay for medical bills and even loss of income, according to Birla Sun Life Insurance, a provider of a variety of insurance in India. In fact, the best course of action is to take on a policy early in life, while you are still young and vital, as well as illness free.

Retirement Planning

Choosing the right life cover could also be a great way to save up for life after retirement. The premiums you pay during your earning life ends up giving you a steady income when you are no longer actively employed. According to Investopedia, it is a good idea to consider the type of policy that would allow you to save for the long term while also providing protection. It is a good idea to compare Term Life with Whole Life policies at this time. Term insurance is a pure insurance product and does not have an investment component.

Diversify Investments

Yes, life insurance plans in India are a good investment vehicle. The key to smart investing is to diversify your portfolio with a wide variety of instruments. This is also where the saying, “the early bird gets the worm,” makes the most sense. The earlier you start, the bigger will be your nest egg by the time you retire. However, make sure you check your risk tolerance and ensure that you balance risk with reward across several asset classes, according to Fidelity Investments.

Tax Benefits

Life insurance in India offers a good way to save on taxes too! The premium you pay on your policy is tax deductible under Section 80c of the Income Tax Act. In addition, maturity proceeds are also exempt from taxation under Section 10(10D) and Section 10(10A)(iii) of the Income Tax Act of India.

The maximum deductible limit is Rs 1.5 lakhs, including the amount paid for other tax deductible investment options. Also, tax deduction is permissible for premiums up to a maximum of 10% of the sum assured for all policies issued on or after April 1, 2012, elaborates Tax Guru.

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    • Jasmeetk profile image

      Jasmeet Kaur 20 months ago from India

      well said