Among the many long-term tax-saving investment options available in the financial market, life insurance is one of the most fundamental instruments you need to invest in. In addition to offering a host of advantages to the investor, a life insurance policy also provides several benefits to the investor’s family and legal heirs.
When you consider the possibility of investing in life insurance, one of the first questions you’ll be faced with is this – who should buy life insurance? The answer to this question focuses on the financial situation of the investor. Typically, anybody who has a financial dependent would benefit from investing in life insurance. Financial dependents could include children, a spouse, a sibling, or even dependent parents.
Another category of people who should buy life insurance includes investors who want to enjoy the benefits of tax savings coupled with long-term capital appreciation. A life insurance policy is one of the few investment options that offers both these advantages. Aside from these benefits, there are many other ways in which life insurance can help the investor.
Here are 10 reasons why a life insurance policy is a must-have.
To replace loss of income
A life insurance policy pays out death benefits in the event of the policyholder’s death. This is generally a lump sum amount that can help the insured’s family deal with the loss of their primary source of income. If you’re the main breadwinner in your family, life insurance can help secure the future of your dependents by offering financial benefits.
To repay pending debts
Debts taken in the name of the insured continue to remain a financial responsibility even after the demise of the policyholder. However, without an alternate source of income, the legal heirs of the deceased may be incapable of repaying any pending debts. Here’s where the maturity benefits from a life insurance policy can be of significant help.
To meet educational expenses
If you invest in a life insurance policy when you’re in your twenties, it’s highly likely that the policy will mature just around the time your child attains college-going age. The proceeds received as part of the maturity benefits can help you meet the steep costs associated with higher education.
To diversify your investments
Life insurance is one of the few investment options that come with extremely low risks. So, if your current investment portfolio is in need of some stable low-risk investments, purchasing a life insurance policy can help you balance your exposure to risk. All you need to do is pay your premiums regularly to ensure that your returns on the investment are guaranteed.
To save for retirement
If you don’t have a retirement plan in place, investing in life insurance can help you get started. By investing in a protective cover when you’re younger, you get to enjoy lower premium costs. So, for a nominal monthly, quarterly, semi-annual, or annual fee, you can keep your investment plan in place, thus contributing to your retirement fund.
To receive tax benefits
Life insurance is also among the many tax-saving investment options available to investors. The premiums you pay can be deducted from your total taxable income as per the provisions of section 80C, up to Rs. 1.5 lakhs. In addition to this deduction, the maturity or death benefits received under an insurance plan are also tax-free as per section 10.
To benefit from add-on riders
For a small additional fee, you can add riders to your life insurance policy. A rider is an additional benefit that offers an extra protective cover in case of unfortunate occurrences like accidents, disabilities, diagnosis of a critical illness, hospitalization, or surgery, among others. These add-on riders can help investors and their family cope with tough times.
To improve your financial security
Among other things, a life insurance policy can be the safety net you need to fall back on if life throws a curveball your way. The maturity benefits promised under the policy can be a reassuring cushion that your post-retirement needs will be taken care of. It also ensures that your legal heirs are financially secure in the unfortunate event of your death.
To achieve long-term goals
If you survive the policy’s term, you’ll receive a sizeable maturity benefit from the insurance provider. This lump sum payout typically includes the sum assured by the plan. Over and above this, a bonus amount is also usually added. Together, these funds can help you achieve any long-term goals you may have planned for that stage in your life.
To leave behind an inheritance
If you have children, a dependent spouse, or aged parents, you’ll undoubtedly want to make sure that they’re taken care of in case you’re not around someday. An inheritance can help keep their future financially secure. And even if you do not hold any assets like land or gold to your name, a life insurance policy can ensure that you leave behind a sizeable inheritance.
Canara HSBC Oriental Bank of Commerce’s Invest 4G is a unit-linked insurance plan (ULIP) that offers investors scores of benefits such as wealth creation, tax savings, a protective cover, and death benefits. You can choose from among 7 different funds to invest in, and you have a selection of 4 different portfolio strategies to pick from. Other benefits offered under the Invest 4G scheme include partial withdrawals and the option to switch between funds. With so many added benefits made available to the investor, this ULIP is one of the best investment options for people interested in a versatile instrument to park their funds in.