When it comes to long-term financial investment options in the financial market, nothing beats the importance of life insurance. It is considered one of the most crucial investments that you need to integrate into your financial portfolio. Other than offering you multiple advantages, such as tax benefits, a life insurance policy also protects the financial interests of your family, should something happen to you.
Many people wonder if they really need life insurance and if it would be affordable in the long run. But if you are someone who is the sole earning member of the family or has dependents at home, then you need to get yourself a life insurance plan. There are several helpful tools online these days, such as an insurance premium calculator that help you accurately calculate the premium that you can comfortably pay throughout the policy tenure.
You can also consider investing in a life insurance policy if you are looking for effective ways to reduce your tax liability and increase your wealth over time. A life insurance policy, amongst the many other types of investments, offers both these benefits and many more that makes it such a powerful instrument in every financial portfolio.
Here are the reasons why you need to consider investing in a life insurance policy today.
Acts as Replacement For Loss Of Income
The death benefit paid after the untimely passing of the policyholder can help the family members get back on their feet and fill the financial vacuum that you left behind. The lumpsum amount can become their primary source of income that can be used to pay for household expenses and financial goals, such as a daughter’s marriage or their education abroad.
However, remember to use the insurance calculator to calculate the accurate sum assured. Over-insured can make the policy unsustainable in the long run, and underinsured will defeat the purpose of investing in a life insurance policy. Therefore, it is important to get the amount right. Ideally, it should be at least 15-20 times your annual income.
Supports Repayment Of Debts
We all have loans these days. Some take it to buy a house, and others take a loan to pay for their education. Imagine if something were to happen to you while your loan is still unpaid? The death benefit your family members receive after your demise can be used to pay off these debts.
Diversifies Your Portfolio
Life insurance is a low-risk financial instrument. So, if you want to maintain a good risk profile for your financial portfolio, then a life insurance policy will be a perfect addition. All you need to do is pay your premiums consistently to get guaranteed returns. Use the insurance calculator to calculate the premium that you are able to afford along with other liabilities.
Helps With Retirement Planning
If you haven’t already planned for your retirement, then investing in a life insurance policy can be a good place to start. Start at a young age so that you can leverage the lower premiums for a longer period of time. An insurance premium calculator will help you see objectively how beneficial it is to start investing early in your age.
Offers Tax Benefits
When you invest in a life insurance policy, you become eligible for tax deductions under section 80C of the Income Tax Act, 1961. You can claim a rebate of up to Rs. 1.5L and the death benefit or maturity benefit is also tax-free u/s 10D.
Provides Rider Benefits
You can expand the coverage of your basic life insurance policy by supplementing it with rider benefits. You can add riders to your policy for a nominal fee and make your policy more comprehensive. For example, a critical illness rider will make you eligible for sum assured if you are diagnosed with a serious/critical illness listed in the policy document.
Unlike health insurance, you can use this amount to pay for medical expenses, medications, lab tests, or even household expenses. However, since riders can bump up your premium price, you must use the insurance premium calculator to ensure that it is still affordable and sustainable throughout the policy duration.
Gives Peace Of Mind
A life insurance policy gives you peace of mind knowing that your family and their financial wellbeing will be taken care of in case something happens to you. The death/maturity benefit promised under the policy can also be used to meet your long-term goals.
Some life insurance policies grant maturity benefit to policyholders who outlive the term. This payout can be used to pay for your retirement or other financial requirements of that life stage. However, life insurance with maturity benefit can have slightly more premiums. So be sure to use the insurance premium calculator when looking for a life insurance policy for investment.
Buying a life insurance policy is an important decision. Since the future is unpredictable, a life cover gives you the guarantee that your loved ones will be financially secure even in your absence. There are many insurance providers these days that offer comprehensive online tools, such as an insurance premium calculator, that allow you to compare policies and make a thoroughly informed and appropriate purchase decision.
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