The purpose of a life insurance policy is to provide protection and financial assistance for your family and you, and help maintain the stability of your finances. When you contribute to the life insurance policy, you can create a stable source of money that can be used to fund longer-term goals like retirement planning, education, or wealth creation. This article will explain the purpose of life insurance.
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Why would you require insurance?
Let’s look at the significance of life insurance and the reasons why we should have it.
- Contributes to economic growth by ensuring that insurance premiums from businesses and individuals are pooled and put into durable, secure instruments like securities issued by the government. These investments support the development of infrastructure and other national initiatives.
- Creates wealth over the long term: Life insurance allows policyholders to pay comparatively low annual premiums, which accumulate over time. If the policyholder dies within the duration of the policy, then the beneficiary gets an inheritance in the event of death.
- Offers tax benefits: Benefits and premiums that are received from life insurance policies can help reduce tax-related obligations, according to Sections 80C or 10(10D) from the Income Tax Act, depending on the policy.
- Aids families during emergencies: Health insurance can ensure that hospitalisation and medical expenses are covered, allowing families to deal with medical expenses efficiently.
Insurance types
The different types of insurance are the following:
Life insurance
Life insurance can provide security as well as savings. It is a way to pay regular premiums and, in return, your family members receive an inheritance if anything happens to you. If you live beyond the duration of the policy and die, you are paid the amount of maturity. You may also include riders*, like critical illness riders*, which will increase coverage and protect your financial assets.
Plan for insurance for children
This plan was specifically created to protect a child’s future. It is a combination of life insurance and an investment that is a long-term investment. The money accumulated could be used to pay for education or higher education and marriage, or any other important financial needs. This will ensure that the child’s financial requirements are met, even in the absence of the parent.
Term insurance plan
Term plans provide pure life protection for a predetermined period of time at a lower cost. If the insured dies during the term, they will get the amount assured. If the policyholder lives to the end of the term and dies, no maturity benefits are payable. This type of plan is suitable for those looking for high protection at a lower cost.
Health insurance plan
Health insurance pays for medical expenses that are related to hospitalisation, surgery, or treatment. With cashless services at hospitals in the network, patients can get treatment without having to worry about paying. This helps to keep your finances stable in times of medical emergencies.
Plan of insurance linked to a unit (ULIP)
ULIPs provide the double advantage of life insurance as well as investment. A portion of your premium will provide insurance protection, and the remaining portion is invested in market-linked funds. In time, you will build wealth, as well as life insurance. Furthermore, ULIPs also offer tax* benefits in accordance with Indian taxes.
Endowment plans
Endowment plans provide life insurance with savings. They pay a lump sum at the end of the term or to the nominee in the event of the insured’s death. These plans encourage savings discipline and aid in reaching long-term financial goals, and provide security.
Pension plans
Retirement plans and pensions will help you establish a steady income stream for the post-retirement years. The cost of premiums is put into savings, and at the time of the date of maturity, you begin receiving regular pensions. These plans can help you maintain the financial stability of an older age.
Auto insurance
The auto insurance policy, sometimes known as motor insurance, offers financial insurance against losses or damages to vehicles as a result of accidents or theft, as well as natural disasters. It is required for all owners of vehicles under Indian law. It also helps pay for repairs, third-party liability, as well as other costs related to the automobile.
Home insurance
Your home is protected from unforeseeable events like fire or theft, as well as natural catastrophes. It covers the structure as well as the contents of your home, offering the financial security of both tenants and homeowners.
What’s the objective of life insurance?
The main objective of Life insurance policies is they provide financial protection for your family members and dependents in the event of your death. It guarantees family members are able to keep their standard of living without financial stress.
- Financial security: Life insurance serves as a safety net to help dependents cope with their income loss and cover everyday expenses.
- Cost and debt coverage: Payouts can be used to pay off outstanding debts, like home loans, or to pay for immediate expenses, thus avoiding the loss of assets.
- Life insurance: This type of insurance is a source of regular revenue for family members, allowing them to pay their expenses for living expenses and their future needs.
- Future goal funding: It assists in the financing of long-term goals, such as the education of children or other major financial plans, while not affecting their quality of life.
The advantages of the life insurance policy
The importance and role of insurance in a person’s life cannot be overemphasized. Here are a few advantages of having a life insurance policy.
- It will help your family meet all financial obligations, including outstanding loans.
- It will provide funds to your family in order to cover the expenses for the education of your children.
- It assists in compensating for the loss of a regular income for your family.
- This allows your family to provide the needed medical and health care to your parents or other relatives who are sick.
Conclusion
Life insurance is an insurance plan for financial security. It’s a good method to ensure the financial future of your family. It can help cover costs, pay for the cost of living, and help finance long-term goals such as retirement or education. Selecting the right policy can ensure the loved ones of your family are covered even in the event of your absence. Life insurance can help cope with life’s challenges, knowing your family’s financial security is protected.
