You may have heard that having a good life insurance policy comes in handy during an emergency; it gives you financial protection when you need it the most. But do you know about your life insurance policy? If not, then you must know the following five things.
As the name suggests, a life insurance policy is a type of insurance that provides financial cover to the family, in the event of the policyholder’s unfortunate demise. Life insurance is a well-known and popular financial instrument around the world that protects millions of families. If you are looking to buy life insurance, you must be aware of the following five things.
You may not realise it, but life insurance is a necessity for all
A lot of people tend to put off buying life insurance believing that it is an unnecessary expense. In the event of an emergency, a life insurance policy comes in hand to give your family the necessary financial cushion. Depending on the type of life insurance plan you purchase, the nominee gets an assured amount in the form of the death benefit, and the interest accrued over the policy duration. In a nutshell, a life insurance policy is the most definitive way to safeguard your family’s financial future even when you are not around.
Life insurance is cheaper than you think
One of the most common notions people have about life insurance is that the premium is expensive. The truth is that you can get a life cover with a premium as low as Rs. 500 per month. If you don’t want to buy any fancy plan with an investment option, you can purchase a term plan or a pure life cover plan. It has a low premium that is affordable for all. You can pay a small amount every month, and in the event of your unfortunate demise before the end of the policy term, the insurer will pay the sum insured to the nominee.
Life insurance can double up as an investment instrument
Today, with the insurance companies in India offering a variety of plans like the Unit Linked Insurance Plan, life insurance provides not only protection but also doubles-up as an investment instrument and provides valuable returns. A part of the premium you pay for ULIP is used for life protection. The other part is invested in the money market, and the returns offered are higher than the traditional investments like a bank savings account and FD.
A life insurance policy helps you reduce tax liability
This is one of the most significant benefits of buying a life insurance policy. No matter the type of life insurance policy you buy, the premium paid for the same is eligible for tax benefit under Section 80C of the Indian Income Tax Act. You can get a maximum deduction of Rs. 1,50,00 per annum. Additionally, the death benefit received by the nominee is fully exempted from tax. Thus, a life insurance policy guarantees protection against uncertainties and helps you reduce your annual tax liability.
You can customise your life insurance plan to suit your needs
Although there are hundreds of plans available in the market, life insurance is not a one-size-fits-all product. The insurance needs may vary from person to person. And, thankfully, you can customize your insurance plan to suit your specific requirements with add-on covers.
You can purchase additional coverage like critical illness cover, income benefit cover, accident cover, etc. Remember, the add-on cover comes with an additional cost, and the more add-ons you choose higher will be the premium. So, choose the add-on cover wisely.