Importance of Life Insurance and Why Do You Need It?

Buying Life Insurance is similar to exercising. You may acknowledge the importance and advantages but want to put it off till tomorrow. The misconception that Life Insurance is not required when you are young and healthy is also a common reason you may want to defer the purchase.It is important to understand that life insurance can assist you at every step, whether you are a young individual or a senior citizen looking to live out your golden years stress-free. Also read: When is the right time to buy Life Insurance? These days, many kinds of Life Insurance plans cater to all your different needs. But let us first look at some important reasons why you need Life Insurance, regardless of your age or any other factor. Also Read: 5 Things to Consider Before Buying a Life Insurance

For mental peace:

One of life's greatest gifts is the support of family members or loved ones throughout your endeavours. Everyone wants what is best for their family, even when they are not around. Buying a Life Insurance plan brings peace of mind knowing your loved ones are financially stable even in your absence.From replacing your income, education of the children, and healthcare costs of parents to savings and investments, your family members can use the money received from your Life Insurance policy in many ways and continue living the life you always imagined for them.

To build wealth

To keep up with the rising cost of living as you age, it's critical that you start the wealth creation process early. This involves diversifying your revenue sources and hedging your risks well. Fortunately, Life Insurance plans nowadays go above and beyond the ordinary by offering extra benefits, such as savings or investment components.Take Unit-Linked Insurance Plans (ULIPs) for instance. These Life Insurance products provide a lumpsum benefit after your death while offering a chance to grow your wealth through market-linked returns. In the long run, ULIPs can help generate good returns on your investments. It can, therefore, be a part of your financial portfolio alongside other investment vehicles, such as Fixed Deposit and Equity Linked Savings Schemes.

To take care of your business

Running a business can require substantial capital, and securing funding is one of the most important aspects during the early stages. Simultaneously, you should also consider buying Life Insurance. Naming your business partners as beneficiaries under your Life Insurance will ensure they receive a death benefit in your absence, which they can use to settle your accounts.

For help with debt repayment

Whatever stage of life you are in, you may require loans to accomplish your dreams, whether it is to buy your dream car, a dream home, or simply to meet other important needs. However, fulfilling your loan obligation can take years, especially if you have taken a sizeable loan. It is imperative that you financially secure your family from any debt obligations that may fall on their shoulders if you were to unexpectedly pass away. Even if your home has other wage earners, loan repayments can throw other important plans off track.Life Insurance provides the answer to this problem. The death benefit or money your family receives can be used for repaying such loans and ensuring they are not required to compromise their lifestyle and financial needs. Also Read: All About ULIP - Unit Linked Insurance Plans

To leave an inheritance for your children

After a certain age, it’s natural to start thinking about what you would leave behind for your next of kin. You can do the same in several ways – by opening a trust fund for your children or distributing assets, such as real estate properties.Another way to leave an inheritance is by buying a Life Insurance plan and naming your children as beneficiaries. This way, your children will be legally entitled to your wealth, and you can ensure they achieve their financial goals even if you are not around.

To gain access to emergency funds

There are several instances in your lifetime during which you require a significant sum of money. For instance, you may need funds to plan for your children’s education, your daughter’s wedding, renovate your house, and so on. Exploring different options to fund these expenses is advisable rather than limiting yourself to traditional modes like Personal Loans or Gold Loans . Life Insurance policies can come in handy for such planned expenses. For instance, you can buy a Money Back policy to get a specific amount every few years, depending on your needs.Another way to raise funds is by securing a loan against your Life Insurance policy. Doing so can even fetch you an interest rate comparatively lower than some Personal Loans . However, remember that the loan amount depends on the Surrender Value of your Life Insurance plan, which is accumulated by paying regular premiums for a certain number of years. Also, not all Life Insurance plans provide this benefit. Only some plans such as Money Back, Endowment, and Whole Life policies do.

For retirement planning

Over time, Life Insurance plans, such as Endowment and Whole Life, accrue a cash value, which is the savings component of the plan. When you pay premiums under these plans, a portion of that money goes towards the cost of insurance coverage, and the remaining portion is invested. This cash value can be withdrawn if you need funds without cancelling your coverage. This additional revenue stream could be beneficial in your retirement years, especially if you do not have several sources of income during that time.You can also opt for Pension/Annuity plans specifically designed to meet your retirement needs.

To enjoy benefits of customisation

You can also benefit from the various customisations that Life Insurance policies offer. Certain Life Insurance policies, for instance, provide riders or add-ons that can cover treatment for specific critical illnesses or in case of accidents. These can prove fruitful if you incur sudden significant medical costs.

For tax benefits

According to Section 80C of the Income Tax Act 1961, you can enjoy tax deductions of up to ₹1.5 lakhs on the premiums you pay for your Life Insurance policy. Additionally, you can save taxes on death and maturity benefits, subject to certain conditions. Remember, this is only if you file your taxes under the old tax regime. Also read: Which Life Insurance plans are best for you?

• Life Insurance plans have several attributes that can benefit your family members or loved ones.
• Buying Life Insurance is a good way to financially secure your loved ones if you pass away.
• You can create an additional revenue stream through Unit Linked Investment Plans (ULIPs), which can be utilised towards other financial objectives.
• Through an accrued cash value, Life Insurance plans can be used to generate emergency funds when you require them.
• One way to leave an inheritance for your children is through Life Insurance plans.
• Those looking to live their post-retirement years stress-free should seek out Life Insurance as it provides a separate source of income.
• If you are at risk of developing a critical illness later on in life, securing a Life Insurance policy with a Critical Illness add-on can protect your funds from medical costs.

Also read: What returns can you expect from your Life Insurance plan?