Are You Buying Life Insurance For the Right Reasons?

Many purchase an insurance plan as a part of their investment strategy. However, an important question that arises is whether a life insurance plan is purchased keeping the right perspective in mind or just for the sake of buying one.

A life insurance plan forms an important part of your financial security. Such policies provide a much-needed financial support during an unfortunate event of death. It helps your family cope up with financial losses that may occur as a result of the demise. The amount obtained may then be used by your loved ones to meet financial obligations such as repayment of an existing loan or meeting daily expenses, besides others.

Life insurance offers three major benefits, namely protection, long-term savings, and investment. Here is an insight into each of these advantages.

1. Protection

Life is unpredictable and full of uncertainties. The risk of an untoward incident such as death cannot be eliminated. In such a situation, your family will have to face financial constraints caused by the loss of your regular income. Investing in a life insurance plan provides the safety net during such times. Your insurance provider is liable to pay the beneficiary or nominee the pre-determined death benefit, thus keeping your family protected even in your absence.

2. Long-term savings

It is important to consider life insurance if you are seeking to make long-term savings. Such a product helps you to save systematically and build a corpus for your future. The accumulated amount may be used for multiple purposes, such as purchasing a new home, funding your child’s future education or meeting his marriage expenses, among many others. What’s more, life insurance plans also offer regular pay-outs in the form of annuities, and is therefore, an excellent method to meet your retirement goals.

3. Investment

Unit-Linked Investment Plans (ULIPs) offered by life insurance providers are primarily investment instruments. This market-linked product acts as a tool to create wealth. ULIPs offer significant returns on the premiums paid towards the insurance policy. Most life insurance plans provide considerable returns during maturity, thus making it an attractive investment vehicle.

Besides the major aforementioned advantages, life insurance plans offer a host of other benefits. You may claim tax deductions under Section 10, 80C, and 80CCC of the Income Tax Act, 1961 on the premium paid towards your insurance policy. You may also borrow a loan against your insurance plan in case of a financial crunch.

 Buying life insurance plan is a necessity. While many invest in such a plan, not all are aware of the numerous benefits it offers. Life insurance plans help your family tide over difficult times and provide them with financial support in your absence. Besides, availing of an insurance policy inculcates the habit of disciplined savings, thereby enabling you to build a good corpus. You may, therefore, opt to invest in a life insurance plan and fulfill your obligations in the best possible way.

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