Ch. 1:Role Of Life Insurance In Personal Finance
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Key takeaways from this chapter
What Is Risk Management?
How Can Life Insurance Help?
Benefits Of Life Insurance In Financial Planning
Life insurance also disincentivizes dropping off midway, and incentivizes long-term systematic investment of savings. This component of life insurance helps the fund managers in investing money more effectively over time, as there are fewer drops and withdrawals when compared to other products without a lock-in or minimum period of investment. It’s as if you are on a diet and you love ice cream - so, you need to create disincentives and a system to prevent you from purchasing an ice cream.
A serious illness or disability can sometimes have a greater financial impact on your family than death. Because not only will you lose your earnings, but there will also be additional expenses you and your family will have to bear as a result of the disease or disability. Life insurance can help you and your family deal with the financial risks associated with death, disability, and disease.
You can claim tax deductions on the premiums you pay every year under Section 80C of the Income Tax Act, 1961, up to a limit of Rs. 1.5 Lakhs. And, the payout made by the insurance company is exempted from taxation, under Section 10(10D) of the Income Tax Act, 1961.
Things That Are Covered Under Life Insurance
If you are diagnosed with a serious illness listed in the policy document, the critical illness rider will offer a fixed sum of money. This money can be used to cover all extra expenses such as physiotherapy fees, rehabilitation charges, etc. you and your family will have to bear because of the disease. The money will also act as a replacement for the income you might have lost because of the diagnosis.
The waiver of premium due to critical illness rider will waive off all your pending premiums if you are diagnosed with a critical disease listed in the policy document. And, the waiver of premium due to accidental disability rider will waive off all your outstanding premium payments if you get disabled due to an accident. So, you can enjoy your life insurance cover for the remaining duration without worrying about the premium payments.
Similarly, with some life insurance plans, you can also opt for a surgical care rider. If you are hospitalised for a minimum period of 24 hours for a surgery that is medically necessary, this add-on will offer a fixed sum of money. The money that will be paid will depend on the type of surgery you undergo.
Now, when we talk about death, we mean every type of death. Life insurance covers all types of deaths except for suicide in the first year of buying the policy. So, death due to accidents, natural causes, participation in risky sports, intoxication, natural calamities, man-made disasters, etc. are all covered under a life insurance policy.
Life Insurance Plans That Offer Financial Security To Your Family
Here are a few types of life insurance policies that help in financially safeguarding the future of your loved ones -
It allows you to systematically invest in a low-risk financial instrument, and build wealth to cover various goals, like your child’s education, purchasing a house, retirement, etc. besides helping you in financially securing the future of your loved ones.
It offers a life cover that is usually 10 times the annual premium you pay. The life cover can also be 15 or 20 times the annual premium - depending on the product and insurer you choose.
Child plans come with an in-built premium waiver feature that ensures that your child’s goals are protected - in case you pass away before your child’s dreams are fulfilled. The insurer will waive off all the remaining premiums under the policy in case of your unfortunate death during the premium payment duration. So, besides offering financial protection to your child, a child plan also ensures that all your child’s goals are taken care of - without creating any financial burden on them.
Important Things to Note Before Buying Life Insurance Plan
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Disclaimer
ABSLI Salaried Term Plan (UIN:109N141V01) is a non-linked non-participating individual pure risk premium life insurance plan; upon Policyholder’s selection of Plan Option 2 (Life Cover with ROP) this product shall be a non-linked non-participating individual savings life insurance plan.
¹ LI Age 21, Male, Non Smoker, Option 1: Life Cover, PPT: Regular Pay, SA: ₹ 1 Cr., PT: 10 years, Premium paying term: 10 years, Annual Premium: ₹ 5900/- ( which is ₹ 491.66/month) Premium exclusive of GST. On death, 1 Cr SA is paid and the policy terminates.
ADV/12/22-23/2411