Only 10 per cent of people are insured in India. This figure is alarmingly low. Investing in life insurance is a crucial financial decision. Regardless of your age or economic status, the future is uncertain. There are a high number of premature deaths due to accidents or illnesses. Hence, for a sole breadwinner of the family, life insurance is a financial necessity. Insurance safeguards your family’s financial future.
What is Life Insurance?
Before diving into the importance of life insurance, it is essential to understand the term first. Life insurance is a legally binding contract between the policyholder and the insurance company that offers financial support. The insurer guarantees to pay the assured sum to the beneficiary if the insured dies. For this assurance, the policyholder has to pay a premium, i.e., a predefined amount, regularly.
Reasons Why Life Insurance is Important
Family’s Financial Safety
Our family is a priority for all of us, and meeting their every financial need is an essential responsibility. If your family is dependent on you, then life insurance will take care of them even in the unfortunate event of your demise. Their living expenses, children’s education, and all other expenses will be handled by life insurance. Hence, the direct loss of income will be replaced easily.
Long Term Goals
Life insurance is a long-term investment that can help you in achieving your future goals. After maturity, most insurance policies pay a sizable amount to the insured. These funds can help you make your long-term dreams a reality, such as buying a home, investing in a business, etc.
Repaying Debt
Debts continue to be a financial liability even after the death of the insured. And in case there are no investments, your family can find themselves in a challenging situation, incapable of repaying it off. Hence, life insurance with the correct terms and conditions will prove helpful in times of crisis.
Tax Saving
Regardless of the life insurance policy you invest in, the premium paid will be eligible for Income-tax deductions. The maximum benefit for a single financial year is Rs.1.5 lakhs claimed under Section 80C as a life insurance premium. Even the proceeds of particular policies on maturity or death are tax-free, shown under Section 10(D).
Retirement Cushion
Investing in life insurance is your first step towards planning for retirement. When you are young hefty insurance covers are available at economical premiums. So, the early you start, the excess cushion you are creating for your old age. Some policies even provide monthly amounts to the insured after maturity as a pension.
Leaving Inheritance
Life is uncertain. If you are not around someday, you will want your family can take care of themselves financially. An inheritance can safeguard them from sudden significant expenditures. Even if you do not hold any gold or land assets, life insurance will prove a good backup.
Conclusion
Life insurance is vital for being financially stable in the event of a contingency. Apart from this, it is one of the safest investments that never loses its charm. One should buy a life insurance policy as early as possible for maximum benefits.