Published on July 17, 2021
Protecting the future of your loved ones is the foremost thing on your mind, particularly if you are the sole financial provider of family. The only safety shield that takes care of your family in your absence is Life insurance. While there is a lot of awareness around life insurance policies, unfortunately, not everyone has one.
A study says that more than half the Americans do not have any form of a life insurance policy. Most of the people believe that it is expensive to buy an insurance. However, that if far removed from the truth. In fact, if we do the calculations, the average cost of a policy per year turns out to be quite affordable. Hence, life insurance is a must in your investment kitty.
Besides, providing financial security for your family and dependants, life insurance offers tax benefits, critical illness cover and other uses. Here are some of the benefits that Life Insurance brings along:
1-More than just a death benefit
Life insurance is a source of assured income for dependents. The benefits that they receive periodically would help them to pay regular expenses like medical bills, school/college fees, utility bills, credit card bills, mortgage payment etc.
However, Life Insurance is not just a death benefit that will protect your dependants financially in your absence. It is also a form of long-term investment. You can also use the lumpsum proceeds to meet your financial goals like kid’s education, buying a house, or retirement planning based on your life stage.
2-Coverage for terminal Illnesses and disability
Many life insurance policies offer additional benefits, known as riders, to enhance your coverage. In some countries, accelerated benefits rider allows a policyholder to access some or all the death benefit under certain circumstances. If he is diagnosed with terminal illness and is expected for less than a year, he can use the death benefit while he is alive.
Life insurance can also be combined with other types of protection, such as a disability insurance. Such an additional cover can also replace a portion of your salary if you aren’t able to work due to disability.
3-Life insurance brings in a lot of tax benefits
In some countries, the heirs might need to pay an estate tax after receiving an inheritance. In that case, life insurance can be utilized to offset this cost partially or completely. Your financial advisor will be able be help you understand the implications of life insurance on your estate taxes. Also, In the US, Life insurance payouts are exempt from Income Tax calculations and your dependants don’t have to account for it while filing their tax returns.
In India, the premium paid towards Life Insurance is also exempt from Income Tax calculations. The premium payment is eligible for deduction from the gross taxable income.
4-Inculcates financial discipline in young investors
Life insurance is the best way to inculcate a good saving habit in young investors. If you start investing at a young age, you can reap benefits of a lower premium and better coverage owing to increased life expectancy. Through life insurance, an investor can plan for various life goals at the very initial stages. The premium payments will help you to save regularly and build a substantial amount which your family will receive at the time of any eventuality.
It is evident that Life Insurance is a necessity, and contrary to beliefs, it is not just for the wealthy. Whatever your income level, life insurance is the only tool to ensure that your loved ones lead a financially stable life after your death. In fact, Life Insurance can be a lot more affordable than you perceive. You just need to understand the policy benefits well and do the math. It is one of the best risk mitigation cum protection tool. At the end of it, it’s about the financial well-being of all your family members and you don’t want to take a chance.