Life Insurance and Estate Planning

Table of Content

1. Your family may not get everything you leave

2. What life insurance does that other assets cannot

3. If you pass away without a plan

4. Will is not enough

5. How much insurance for your inheritance

6. If you already have assets

7. Life insurance helps with taxes too

8. Choose wisely

9. Plan now, not later

Most people buy life insurance thinking about what would happen to their family after their passing. Life insurance does play a bigger role in your family’s future. Not just as money after the demise of the breadwinner, but as part of a plan. A plan to leave something behind, smoothly and without trouble. That’s what estate planning is about.

Estate planning means deciding who gets what when you are gone. It includes property, money, valuables, even loans. Many people make wills. Some add nominations to accounts. But they forget one simple thing: life insurance.

Your family may not get everything you leave

When you pass away, your assets do not always go directly to your loved ones. Sometimes there are legal delays. Other times, claims are stuck due to no will or unclear details. Banks may freeze accounts. Property may face disputes. Worse, if you had loans or pending taxes, those get deducted.

That is why families often get less than they expected. Even when you planned everything. Life insurance can help fix that gap. It pays a fixed amount, tax-free, to the person you name. And it does not get stuck in court.

What life insurance does that other assets cannot

Your estate may be in the form of a house, a flat or a shop. Some families are known to invest in gold or in a savings in a bank. But these things take time to convert to cash. Also, their value can change.

Now imagine your family needs money within days for fees, rent, loans, or just survival. That is where life insurance helps. It ensures that the payout in the form of death benefit is quick. There is no long waiting period and no selling assets in panic.If there are multiple beneficiaries, , you can choose who gets how much. A life insurance policy can give you more control than most other tools.

If you pass away without a plan.

Without a plan, things can get messy. Financial institutions cannot release funds without necessary documentation. Property title can be stuck.If you have no will, it likely goes under succession law. That means long legal steps and possibly court battles.

If you had loans, your family may lose the house. Or get calls from lenders. If you had a business, it could get locked up.

That is why a simple life insurance plan makes sense. It acts as an emergency fund for your family. They use it to pay bills, clear loans, or manage until other things settle.

Will is not enough 

A will outlines how a person’s assets are to be distributed. But it does not create money. If your money is stuck in a fixed deposit or your house cannot be sold quickly, what can your family do? A will also needs probate in many cases. That means more delay.

Also, if your assets are not enough to meet costs, your family may still fall short. That’s where life insurance steps in. It fills the gap. It pays fast. It does not need a will to release. It is like having cash ready when your family needs it most.

How much insurance for your inheritance

Think about your current loans. Add some future costs such as kids’ school, rent, bills, maybe health costs. Then look at your savings. Do they cover all this if something happens to you tomorrow? Many people just take ₹50 lakh or ₹1 crore cover because it sounds right. But it may not be enough.

Let us say you have a home loan of ₹35 lakh. And monthly expenses of ₹50,000, which means yearly ₹6 lakh (without inflation) . If you pass away suddenly, your family needs at least ₹95 lakh to feel secure for next 10 years (₹6 lakh x 10) plus repay the home loan (₹35 lakh). So base your sum insured on real numbers. Not just what others are taking.

If you already have assets

Even then, insurance adds value.

Assets take time. Insurance gives liquidity.

Assets may be disputed. Insurance rarely is.

Assets may have joint holders. Insurance goes only to your beneficiary.

Also, if you want to leave something for your spouse and something else for your children, insurance helps split things clearly. You can even buy two policies and name different people in each. That’s not possible with one house or one FD.

Life insurance helps with taxes too

Yes. The payout is tax-free under current laws. Your other assets may not be. For example, a second flat or shares may need capital gains tax. But your insurance payout goes fully to your nominee.

Also, when your estate is large, and you expect taxes or legal costs to reduce the value, a life policy helps cover that. It acts as a buffer.

Some people also use life insurance to leave behind a clean, ready fund just for those taxes. That way, the rest of the estate stays untouched.

Choose wisely

Simple term insurance works well. It gives high cover at a low price.

If you want the money to grow slowly and stay protected, you can choose a whole life plan. These go on till age 99 or 100.

Some people prefer ULIPs or money-back plans, but keep the focus on death cover.

The bigger your policy, the better the safety net for your family. And remember: do not let your policy lapse. One missed payment, and it becomes useless.

Plan now, not later

No one wants to think about dying. But it is harder to imagine your family in trouble.

A small premium today can prevent that pain. Add life insurance to your estate plan now.

Talk to your spouse. Review your nominees. Write down your policy details and store them safely. Even better, tell your family where to find them.

Do not wait. Because one day, this simple step could be the reason your family stays safe and stable.

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