Life insurance policy provides cover for all the risks associated with the policyholder’s death and can assist their family with financial benefits in case of an unfortunate demise. It also covers the risks of personal death, retirement and disabilities. This is because, when there is only one breadwinner in a family, they might run into financial shortage after his/her death. As people are getting more aware about the value of their lives, there has been a growth of 12% in the life insurance industry. The payable premiums have accumulated a huge amount of 105.2 billion in the financial year of 2016-2017.
Though this growth is estimated to rise almost up to more than 15% in the next five years, India still has only 1.5% of the insure population in the world. This boils down to the fact that people need to invest more in such policies, as it is a beneficial long-term investment.
Why You Should Invest in a Life Insurance Policy
The main reason for investing in such policies is securing your family’s financial stability after you have left them. Apart from that, you can save sufficient money for future contingencies like serious medical illnesses, children’s higher education, having a steady income even after your retirement, etc. Moreover, you can also pay off any additional debt like your loan instalments.
Purchasing a policy when you are younger, gives you the benefit of not paying higher premiums. As you grow older, your health and life risks increase. Hence, your premium would increase if you buy after you reach 40 years of age. When you are young, you are healthier and have less responsibilities. You might have to pay for either your siblings or your parents. The dependents are less which lets you earn and save more.
You can save more on paying taxes. The payable premium for life insurance policy is eligible for a tax-deduction under Section 80C of Income Tax Act with a maximum limit up to 1.5 Lakhs. Also, as per Section 10D, you can save on tax on the reason owing to the maturity or death. Under new rules, Unit-Linked Insurance Plans are exempted from Long Term Capital Gains Tax. This will increase the cash flow towards asset management of insurance companies, which will ultimately raise the shareholder returns.
Foreign investments are increasingly showing their interest in the Indian insurance sector. Pension funds have also grown due to insurance sector and the main reason behind it is Indian demographics. Now, there are independent subsidiaries, the exposure is direct and stocks can be held for a longer time. Also, India’s population is growing on a rate of 1.2% which means it would increase the per capita income in the coming years.
Policyholders can also create an inheritance for their children by paying premiums till their demise. This way you can secure your children’s future by assigning them as your beneficiaries after you. Children can have a stable financial future which can be utilized for any monetary requirements.
Apart from families, life insurance policies also protect your business. You can protect your business operations and keep them running even after you are no longer the owner. Also, if a partner meets with death, such policies take care of all the financial losses which arise from such an incident. You can choose between a term insurance and life insurance policy – based on the period for which you want to invest.
Such policies can be availed with some add-ons like critical illness insurance, personal accident, maternity insurance, etc. to provide more stability and security to your finances. Accelerated death rider also provides the facility of availing the whole claim or partial claim. This is applied when the policyholder has less time to live due to a serious medical condition and needs money for treatment.