Over the last decade, Indians’ discretionary income has increased, as has their consumption. As a consequence, the ordinary Indian family’s spending habits have shifted. People’s financial aspirations have gone, and they are now spending up to 25% to 60% of their income on aspirational wants, up from 10% to 20% in 2009.
The growth in lifestyle inflation necessitates precise financial planning that may limit expenditures, develop wealth, and assist you in saving enough for critical milestones such as your children’s schooling and retirement.
There would be hardly anyone who does not know what is life insurance!
Purchasing life insurance as soon as you begin earning money should be one of the top items on your financial checklist. It provides your family with a solid safety net to cover their costs and maintain their current lifestyle even when you are not around.
5 Reasons Why You Need To Invest in Life Insurance
If you already know what is life insurance, then let us look at some of the other reasons why you should include a life insurance policy in your financial plan:
1. Affordable Premiums
Life insurance is only an insurance policy with no investment component. It is the most affordable kind of life insurance policy accessible. This implies you may get a policy with a bigger amount insured that protects your dependents and removes the future risk for minimal rates.
The sooner you get term insurance, the cheaper the premium you’ll have to pay. On average, just 1% of an individual’s annual salary is spent on acquiring life insurance for the remainder of his or her life.
2. Financial Security
If you are the only working member of your family, your absence may leave your family financially exposed, particularly if you took on extra commitments such as a loan or mortgage while you were still living. A life insurance policy ensures that your loved ones are financially secure and free to pursue their goals and desires.
You may tailor the insurance to your family’s needs by adding riders to cover any additional hazards that you identify. Riders such as critical sickness benefits, accidental death benefits, and partial or complete disability benefits are inexpensive and give additional coverage when added to current life insurance policies.
4. Tax Benefits
Most paid people want to invest in choices that provide better returns while also allowing them to avoid tax. This is a critical component of their financial planning.
Not only may you deduct up to 1.5 lakh in taxes on premium payments for term insurance maintenance under Section 80C, but the money given to your beneficiaries as the death benefit is also deductible under Section 10. (10D).
Furthermore, selecting a health-related rider (for example, a critical illness rider) may allow you to qualify for extra deductions under Section 80D of the Income Tax Act.
You can customize your life insurance policy to meet your specific requirements and aspirations and those of your family. There are three kinds of coverage available:
- Increasing coverage
- Decreasing coverage as per your needs.
You have many payment choices to select from:
- Lump-sum payout
- Part lump sum, part monthly income payout
- Monthly income payout.
You can also choose to cover your spouse under the same plan.
Key Factors To Consider While Buying Life Insurance Policy
Life insurance is unquestionably necessary. It is the finest thing you can do to protect your family’s future before investing in other programs. But how exactly?
The market is brimming with good plans supplied by reputable companies, but that doesn’t imply that every policy will meet your needs. Let us give you a rundown of the essential aspects to consider when purchasing a life insurance policy for your family.
1. Age Criteria Of Policy And Your Life Stage
The first item to consider while purchasing a life insurance policy is your present life stage and age. When you have enough money, you may manage your finances for various life phases differently as you become older.
It might vary from your medical requirements to supporting your child’s higher education to purchasing a home. Planning for the future ahead of time can help you reach your goals.
2. The Best Combination Of Premium And Coverage For You
You should set long-term objectives that are measurable and invest appropriately. While a low-cost policy may seem appealing, its insurance coverage may make it unsuitable in the long run.
Choose the most significant premium that fits your budget and meets most of your wants. According to experts, your life insurance policy should be ten times your annual salary to cover expenditures in the event of an accident.
3. Background Check Of Your Insurance Company And Agent
All insurance companies offer complete disclosures on their websites that provide you with additional information, such as things your agent may keep a secret.
To ensure the best for you, you must investigate the company’s current financial circumstances, customer service skills, prior conflicts, your agent’s client base, etc.
4. Understanding The Company’s Claim Settlement Ratio
The claim settlement ratio compares the number of claims resolved by the firm to the number of shares received. A firm with a good ratio is worth investing in and can be trusted. However, the market is highly controlled, and most corporations have a balance of more than 80%.
5. Inclusions And Exclusions Of Your Policy
Last but not least, you should always double-check the different and complicated aspects of your insurance so that you are not left powerless in an emergency.
Check that your insurance covers critical sickness, accidental disability, child support benefit, cashless hospitalization, and anything else you could require based on your age and health circumstances. Be knowledgeable and prepared for what your plan does not cover.
Wrapping It Up
Remember to openly state any health concerns, lifestyle illnesses, and habits when purchasing a term coverage to avoid having your claim denied. Financial preparation for the future is incomplete without a pure life insurance policy that decreases risk, assists in preparing for future uncertainties, and is also cost-effective.
The journey of purchasing a life insurance policy starts by asking “what is life insurance” & is a once-in-a-lifetime opportunity that should be approached with caution. The incorrect investment might cost you a lot of money, whilst the perfect one can ensure your loved ones’ future. We’re certain that now that you’re aware of the essential considerations, you’ll choose the insurance that best protects your family’s future.