Life of the bread earner of the family is very precious because if he or she dies, the whole family suffers not only mentally but also financially. It is necessary for every family to plan for any kind of financial uncertainties arising from the sudden death of the family head or the bread earner. Life insurance of India is the most popular form of insurance which provides financial cover to the family in the event of demise or disability of the insured person due to natural or accidental causes. The sum assured cannot compensate for the person and that is obvious but it can definitely provide the family a support to hold on to their financial status and grow from there after recovering from the loss. Life insurance companies provide the assured sum to the family member when the insured person passes away within the term of the policy or on the maturity of the policy as mentioned in the terms and condition of the policy.
Need of Buying Life Insurance
The major needs of life insurance are:
- Protection of Family: If the insured person passes away early naturally or accidentally, the family would need financial support for day to day life as well as special events. Buying a life insurance product would protect the insured person and his family by providing a lump sum amount on such sad event and help the family regain the financial stability over time.
- Education: If parent/s passes away accidentally or due to any natural cause like a critical health problem, child education must not suffer. Life insurance sum would help the child to continue with his or her education after the demise of his or her parent/s.
- Retirement Benefit: Many life insurances comes with retirement benefit plan which helps the insurer of the family of the insured person by providing regular income flow after the retirement of the earning person. It is also beneficial for the future financial need.
- Illness: When the earning person is ill, the income flow reduces or stops and the savings also goes into the treatment of the person. Life insurance product helps in recovering the losses by providing the extra income.
- Life Style: Every family has a certain lifestyle and financial status and no one wants to change it for any accidental event. Life insurance product helps in maintaining the same financial status and lifestyle and also helps in meeting other financial obligations.
Advantages Of Life Insurance
There are many facts which describe why life insurance is important and here we are going to take a look on some of the most important advantages of life insurance.
- Financial Needs: Life insurance is the best option for you if you are the only earning member in your family. Your family depends on you for financial needs and any harm to your would cause great mental and financial loss towards your family. To fight against such contingencies, life insurance policy is the best instrument as it provides lump sum amount to deal with such loss and to meet the financial need of the family.
- Investment option: If you are aware of the investment industry you must know that every profitable investment has a part of risk attached to it. Every investor wants to mitigate the risk factor and life insurance products comes with no risk of losing money except the premium in a term life insurance plan ( if it expires). Though insurance is not an investment and you must separate them from each other but to diversify your savings and investment, life insurance can be helpful. It provides a certain amount of money after a certain period of time or during the time of need which is the main motive for any investment.
- Insurance as Collateral: If you have a life insurance product you can use it as collateral security for drawing loan from any financial institution. In the event of the demise of the insured person, the loan would be repaid by the insurance company to the loan provider.
- Repayment of Loan or other expenses: In case there is a loan which is yet to be paid and the earning member passes away, the life insurance amount can be used for repaying the loan amount. It is also beneficial for certain expenses which involve lump sum amount.
- Tax Benefit: Life insurance premium is exempted from tax u/s 80c of the IT Act.
- Accidents/Critical Illness: Life insurance not only pays for the death of the insured person but also if he or she is disabled in any accident or critically ill in the form of riders.
Life insurance is mandatory for every earning person as the whole family depends on him or her. Life cannot be compensated by life insurance amount even though if it is huge money but for the time being, the family gets a financial support which is necessary.