Life is indeed unpredictable. Along with this comes the importance of money in existence. Life insurance is a financial tool which provides financial protection to the Beneficiary after the death of the insured.One of the most common insurance policies is the pure protection plan like the Term life insurance. Its main aim is to provide protection to the beneficiary, it does not aim at investment. It focuses on a specified period of time unlike a whole life insurance policy. It is important to take into account the guaranteed Premium period in case of a term life insurance. It's up to the Insured to pay the premium monthly or annually. However if the insured does not pay the premium within the Grace Period of 30 days then the Policy is deemed to be cancelled. Different policies have different characteristics. Some policies can be renewed even after the lapse.
Advantages of Life Insurance
•Dual benefit-Unlike other investment tools whose sole motive is wealth creation, Life insurance policies have a dual motive that is it not only acts as a saving instrument but also ensures that people who are dear to the policy holder continue to live life without any monetary burden.
•Planning for life stage needs – There are various things and events in a person’s life span for which a person has to prepare in advance. Higher education, children’s marriage, purchasing property and also building a contingent fund for retirement are few of them to name. Life insurance policies certainly help the grief stricken at the time of the death of the policy holder; however it also has a Maturity period at which there is a defined maturity benefit such as Money back scheme with a fixed interest or a guaranteed cash value.
•Protection against rising health expenses – Nowadays medical expenses are at all time high and if in case it happens to Hospitalization or any unforeseen medical emergency then it can lead to exhaust all you’re saving. In such a scenario life insurance policies provide benefit by providing cover with the Health Insurance plans.
•Induces saving habits – Life insurance policy is a very good way to learn to save as it is a long term contract wherein the Policyholder is liable to pay a pre decided amount for a fixed period of time. Hence even a person who is not used to saving can get into a habit of saving and can build a corpse which acts like a contingency fund which may be used at the time of need.
•Safe and profitable long-term investment – Nowadays there are several investment instruments which are flooding the market. Most of these instruments are very tempting and spend a lot on advertising and promotion, unfortunately they are not very secure and can fall prey of market downturns. In case of Life insurance or any other insurance, always opt of those insurance companies which are regulated by the terms and conditions of IRDA. Since it is a long term investment therefore the policyholder money is held for a fixed time interval and is not invested in risky investments which are more prone to market volatility.
•Acts as a contingent fund – the corpse which is built through a life insurance policy can be used as a contingency fund and can be used for retirement planning.
•Growth through dividends – there are various life insurance policies which offer regular dividends and also announce annual bonuses to the policyholders.
•Facility of loans without affecting the policy benefits – Another major advantage of investing in a life insurance policy is that it gives you a benefit of seeking loans to meet your unplanned needs. This at the same time does not even affect your policy benefits.
•Tax Benefits- Tax benefits may be availed through life insurance as well as health insurance. To know the various tax benefits you need to consider Section 80C, Section 80D and Section 10(10D) of Income Tax Act, 1961. Prior to making your strategy to get the tax benefits, an individual must take a look at his or her economic portfolio. An evident balance must be maintained among st liquid cash along with long term property.
Like everything has a negative as well as positive sides similarly life insurance may also have its own benefits and risks, however the positives in the case of life insurance policy
supersede the negatives.