Buying life insurance has become extremely simple – and also necessary – in India. Life is completely unpredictable. Things can change in the blink of an eye and plunge the family into chaos. Since there is no way to avert or eliminate a tragedy, it is better to buy life insurance to safeguard one's financial future.
Need for life insurance
There are four primary reasons why life insurance is necessary. They are:
- Providing for the family: Your family depends on you for all its expenses. Hence, your absence in the future can spell doom for their hopes and dreams. A life insurance policy reduces their dependence on one breadwinner and helps run the household.
- Paying off debts: Your unpaid loans (house or business loan, private debts) can haunt your family in your absence. Creditors may harass your family for their money, and your loved ones may be forced to sell the house and other assets to pay off these debts. Instead, your life insurance policy can repay your debts and save your loved ones from uncertainty.
- Achieving milestones:You may take a life plan that matures after a certain number of years. This means that you will get a large fund after maturity, which you can use for crucial expenses like children's future education and even buying a second home. Thus, your policy maturity can be timed to pay for milestones in your life.
Benefits of life insurance policy
There are many benefits – and no disadvantages – of taking life insurance. The most important benefit of life insurance is that it protects your loved ones against the perils of a lack of income in the future. Just as you are currently invested in providing for your family, the life plan provides a stable fund that your loved ones can use in your absence.
Apart from plans that cover both individuals and families, there are life policies designed for children and company employees, too.
Many life insurance plans offer a maturity benefit as well as a death benefit. Plans with a maturity benefit can be useful to you even when you are around. They help you plan your financial future in a more systematic manner (as outlined above). Meanwhile, the death benefit of life insurance helps the family tide over the sudden loss of your income and helps keep the family savings intact for bigger purposes like paying for children's education or emergency hospitalisation.
Investment with life insurance
Insurers in India have now broadened the scope of the need for life insurance with the need to earn good returns on the investment. This has spawned such innovative life insurance solutions as endowment plans, equity linked savings scheme (ELSS), annuity plans, retirement or pension plans, savings plans, etc. All of these are insurance products that offer the dual advantage of life coverage as well as the opportunity to earn capital gains on the investment.