What do you think is crucial for financial planning? You might say creating a budget, building a savings corpus, and a promising investment portfolio. But nowhere might you mention life insurance.
When you are creating a strong financial plan for the future, it should include not only the future you are a part of but also a future where you would be absent. Doesn’t matter if we like it or not, life is uncertain. You cannot predict the uncertainties, but you can be prepared for them financially if you have a family that leans on you for their financial requirements.
You can do the same with life insurance. Life insurance might not be a necessary purchase in India, but it sure should be if you prioritize your family’s financial well-being when you are gone.
Let’s discuss why buying life insurance is important:
- It Creates a Financial Net Around your Family
You can ensure that your family’s financial needs are well taken care of even when you are not around – all thanks to life insurance. Life insurance aims to provide financial assistance to the family of the deceased by offering them a lump-sum amount or replacement income as determined by the policy chosen.
Known as the death benefit, this amount can be used by the family to manage their lifestyle expenses, medical costs, and liabilities. The aim of life insurance is to ease the financial burden that comes with the death of the breadwinner or the policyholder.
- It Can Support Necessary Expenses of the Present
You can preserve your savings fund for the unforeseen future that you might not be a part of, but there are present expenses that need to be taken care of as well. Knowing that your family has a promised life insurance amount, you can use your savings for any essential or non-essential expenses.
However, it’s not at all suggested to consume your savings fund entirely. You can use it in parts for such expenses. In order to provide a comfortable and uncompromised lifestyle to your family, a supplementary fund such as a savings fund, along with life insurance, is an absolute necessity.
- Life Insurance Can Also Be Utililized as a Retirement Fund
A term insurance policy can provide your family with a death benefit if the insured dies during the policy term. However, some life insurance policies also offer a survival benefit wherein the policyholder gets back the premium they paid if they survive the policy term. This amount can be used by the policyholder to lead a financially stress-free retirement life.
- You Get an Extended Range of Benefits with Riders
You can strengthen your life insurance policy by purchasing additional riders. These riders are add-on policies that extend your range of benefits. Although riders differ from company to company, some of the most common ones include critical illness riders, waiver of premium and many more.
You can purchase these riders at an extra cost, which is nominal. Although it is not mandatory to buy riders with your life insurance policy, it is suggested that you do. It will help you save sizeable money in the long run or provide extra financial aid in the event of uncertainty.
- Applicable Tax Benefits Help you Save on Tax
Tax planning is an essential part of financial planning. With life insurance, you cannot only secure your family’s financial future but can also save taxes. All thanks to the tax benefits applicable under Income Tax Act’s Section 80C. As per this section, you can claim a tax deduction of up to INR 1,50,000.
Let’s understand how it works.
If your annual income is 15 Lakh per annum, and you pay 40,000 as an annual premium, then the tax will be computed on INR 14,60,000 (15,00,000 – 40,000).
It would eventually help you save significantly on taxes.
The Bottom Line
Your financial plans for the future cannot be strong without a life insurance policy. Even though it is not a mandatory purchase, it is the need of the hour, given the unpredictable nature of life. It’s a must-have, especially if you are the sole breadwinner of the family. You can help your family prevent financial shocks in the case of your unfortunate death.
It’s not an expense but an investment towards a financially secure future for your family. So, do not wait; invest in the best life insurance policy today and create a financial net around your family.
