When and Why Should I Buy Life Insurance?

Table of Content

1. What Are Life Insurance Policies?

2. Why Should I Buy Life Insurance?

3. When Should I Buy Life Insurance?

4. How Do I Find the Right Life Insurance Policy?

What Are Life Insurance Policies?

Life insurance, in its simplest form, is a contract between the policyholder and the insurer. The insurer provides you with life cover and investment opportunities, and you agree to pay a fixed premium for the upkeep of your life insurance policy. If anything happens to you during the policy term, your nominee receives something known as the death benefit payout. People purchase life insurance plans to provide their family members with financial support and stability when they need it the most.

Why Should I Buy Life Insurance?

Most people know they should buy life insurance plans. But, they often put it off because they think nothing will happen to them. But, the truth is that none of us knows what life has in store for us. A mishap could leave our family members devastated. While nothing can replace you, the payout from a life insurance policy does enable your family to rebuild their lives. Here’s a look at some reasons why having life insurance is crucial:

• Financial Safety Net
  

  You earn money that allows your family to enjoy a particular standard of living. If something happens to you, your family could lose your income. They will have to rethink their habits and make adjustments to survive without your income and support. With a life insurance policy, your family receives a payout in case anything happens to you. The money provides them with some financial stability when they need it the most.

• Customised Offerings
  

  From whole-life insurance policies to term plans, there are different plans for your various needs. You can even choose riders or add-ons to your insurance plan for enhanced coverage. Essentially, you can purchase a life insurance policy that works best for you and your needs.

• Builds Wealth
  

  Whole-life policies also provide you with investment opportunities. The money you pay as the premium gets invested on your behalf in various market instruments. When the policy matures, you receive the corpus as a maturity benefit. You can use this money to finance your golden years and enjoy a happy retired life.

• Helps with Loans
  

  Some insurers allow you to borrow a certain sum based on the corpus collected in your life insurance policy. If you want to take a loan from a bank instead, you can put up your life insurance plan as collateral and get yourself a secured loan. These loans generally have lower rates of insurance, making them ideal.

• Tax Benefits
  

  The premiums you pay to maintain your policy can be deducted from your taxable income. In most cases, the returns you receive on maturity are all tax-exempt!

When Should I Buy Life Insurance?

It’s also a good idea to purchase life insurance plans as early as possible. When you’re younger, the insurer does not view you as a liability. So, they will offer lower premiums for a higher sum insured amount. As you grow older, the premiums could get higher as there’s more of a chance that something might happen to you. The sooner you purchase your policy, the longer you have to grow and build your funds.

How Do I Find the Right Life Insurance Policy?

The kind of life insurance policy you should opt for depends on your lifestyle, goals and financial situation. Let’s take a look at the options available to you:

• Endowment Plan
  

  These policies provide life cover for a specified period. Once the plan reaches maturity, the insured receives a lump sum payout as the maturity benefit. Endowment plans are one of the most popular life insurance plans since it offers cover and an opportunity to grow your money.

• Term Plan
  

  A term policy does not provide any maturity benefit. These policies are purely insurance products and provide life cover for a specific period. If the insured survives the policy, they will not receive any benefit. Term plans are ideal for younger people looking for affordable premiums. You can convert your term policy into a whole-life policy before it expires to continue to enjoy peace of mind.

• Unit-Linked Insurance Plan
  

  Offering both investment and insurance, Unit-Linked Insurance Plans (ULIPs) allow you to invest your money in various market funds. You have complete control over your investment, while the insurer uses a percentage of your investment amount as a premium to provide life cover. ULIPs work best when you’re saving up to fulfil your long-term goals.
  Once you know what your options are, you can pick the ideal plan based on your needs. While selecting a sum insured amount, make sure you take inflation and any debts you have into account. The purpose of life insurance is to provide your family with a financial safety net. If anything happens to you, they can use the payout from the life insurance policy to repay any pending debts and replace your lost income.