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What is the Importance of Life Insurance?

Securing your future and your family's well-being is a top priority, and it can be made easier with the right financial products. Life insurance is the best way to create wealth and secure the future of your family in case of an unforeseen death. So, everyone has different reasons to buy life insurance plans, but the decision to buy insurance is important as it is all about providing financial security for yourself and your family members.
Let us take a look at the importance of life insurance and why you should buy it:

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What is the Importance of Life Insurance in India?

Before we take a look at the need for life insurance, let us understand the importance of life insurance in India:

  • Secure the Financial Future of Your Family: Life insurance plans secure you and your family members financially. Every parent wants their kids to be taken care of even in case of their absence. Life insurance ensures your dear ones won’t suffer financially when you are not around. This way, you can understand the importance of life insurance as it can help you protect your family during your unfortunate death.

  • Complete your Financial Goals: Each of us has life goals that require financial planning. Life insurance policies enable you to achieve those aspirations by combining savings with life coverage. They encourage disciplined saving, where small monthly insurance premiums accumulate over time, steadily growing into a substantial financial resource. The life insurance plan ensures you'll have the necessary wealth in the years ahead to achieve your long-term financial objectives.

  • Comprehensive Coverage with Rider: You can customise and enhance the importance of life insurance plan by adding relevant riders to the policy. The most common life insurance riders available in India are terminal illness riders, critical illness riders, accidental death benefit riders, accidental total permanent disability riders, waiver of premium riders, and hospicare benefit riders.

  • Peace of Mind: Peace of mind is one of the biggest needs of life insurance. Life insurance plans can provide you with the needed peace of mind by knowing that your family can care for themselves financially in the event of your absence. This way, you can live stress-free and improve your quality of life.

  • Save on Taxes: The tax-saving benefits add to the importance of life insurance as you can save on your yearly taxes per prevailing tax laws. You can save under sections 80C, 80D, and 10(10D) of the Income Tax Act,1961.

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What Are The Top 7 Reasons To Buy Life Insurance?

Now that we have understood the importance of life insurance let us take a look at the need for life insurance plans:

  1. Long-term financial goals

    Life insurance plans help create a large financial corpus for your long-term financial goals, allowing you to save money with life cover protection.

  2. Protect the future of your child

    All parents want to provide their children with a good future. Life insurance plans ensure your child has the best future, even in your absence.

  3. Loans and Liabilities

    If you have availed of a loan, it is always important to consider buying a term insurance plan. This ensures that the burden of your debts/loans does not cause any difficulty for your dependents in your absence. Term life insurance plans are considered affordable to secure the amount of home loan and protect the policyholder's family in case of his/her unforeseen death.

  4. Education Planning of Child

    Child education policies help build a financial corpus for your kid’s education expenses in future. This will ensure your spouse has a financially independent life when you are not around. The biggest importance of life insurance is that child plans help you secure your child’s future by providing emergency funds to pay for their higher education or marriage. Your child can also use this money to realise their lifelong dreams.

  5. Secure Dependent/Spouse

    The importance of life insurance is especially noticeable in the case of the main income earner’s unfortunate death. A life insurance plan can help stabilize the future of your dependent and/or spouse and help them live a financially independent life even when you aren’t around.

  6. Secure Retirement

    Life insurance plans can help you secure your and your spouse’s post-retirement life by providing survival and maturity benefits if you outlive the policy term. You can use these funds to maintain your financial independence after losing your regular monthly income. The payout from these plans can be used to fulfill your post-retirement dreams and live your life comfortably in retirement.

  7. Tax-Free legacy

    Life insurance tax benefits offer savings u/s 80C and 10(10D) as per the prevailing tax laws of the Income Tax Act, 1961. You can refer to your financial advisor for a better understanding of the tax benefits applicable.

    The need for life insurance cannot be overstated. It serves as a pillar of financial security, protecting your loved ones and ensuring their financial stability when you're no longer there to provide for them.

    **Note - You can contact Policybazaar’s Insurance Advisor in case you need any assistance or want to solve any query or doubts.

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What are the Points to Consider While Buying a Life Insurance Policy?

  • You should always assess your and your family’s requirements and consider inflation as well to choose the right life cover amount for your policy.
  • Select the best type of life insurance that will help you meet your financial needs in the long run.
  • Consider the premium amount as well, and make sure that the premiums for your life insurance policy fit into your budget. This will reduce the chances of policy lapsation in the future.
  • You can use a life insurance premium calculator to understand better the premiums applicable to your profile and the life coverage you need.

How to Buy a Life Insurance Plan Online in India?

Here is how you can buy a life insurance plan in 2024 from the comfort of your home:

  • Step 1: Visit the life insurance page of Policybazaar

  • Step 2: Select the type of life insurance you want to buy: Term or Investment

  • Step 3: Fill in your name, gender, mobile number, and date of birth

  • Step 4: Enter the details regarding your annual income, occupation type, educational background, and smoking habits

  • Step 5: Go through the list of available plans and purchase the most suitable one

Wrapping It Up!

The need for life insurance plans is that it is one of the most important investments in everyone's life. These plans can not only financially secure your life but also create a corpus in the long run. You can go through the list of life insurance plans offered, their functions, and the importance of life insurance for a better understanding from Policybazaar.

FAQs

  • Q: Why is life insurance important?

    Ans: Life insurance is important because it offers financial protection to the family in case of an unforeseen death of the policyholder. It helps the policyholder’s family stay financially secured, ensuring they don’t have to compromise on their lifestyle.
  • Q: What is life insurance?

    Ans: Life insurance is a financial contract that provides a payout to beneficiaries in the event of the policyholder's death. It offers financial protection and support to loved ones.
  • Q: Why do I need life insurance?

    Ans: Life insurance ensures your loved ones are financially secure in case of your untimely demise, covering expenses like debts, living costs, and future goals.
  • Q: Describe the need for life insurance and explain its importance.

    Ans: The importance of life insurance is providing financial security to your loved ones and covering various expenses, including debt, living costs, and future goals, in the event of your death.
  • Q: What types of life insurance plans are best suited for different life stages?

    Ans: Here is the list of types of life insurance plans you should consider buying for different life stages.
    • People: Prefer market-linked ULIPs or affordable term plans.
    • After Marriage: Consider the term return of premium or endowment plans.
    • With Children: Opt for whole life insurance or child plans.
    • Near Retirement: Choose pension plans or no-cost term plans.
  • Q: How is the premium amount determined?

    Ans: Premiums are calculated based on factors such as age, health, coverage amount, and the type of policy.
  • Q: Can I change my coverage amount later?

    Ans: Depending on the policy, you may have the option to adjust the coverage amount to better align with your changing needs.
  • Q: What happens if I stop paying premiums?

    Ans: If you stop paying premiums, your life insurance policy may lapse, and coverage will end. Some policies may have a grace period for payment.
  • Q: Can you choose a specific policy term in life insurance?

    Ans: Yes, you can choose a specific policy term in life insurance. A lot of life insurance plans offer the choice of selecting a policy term as per the customer's suitability. Not just that, whole life insurance also provides life cover for the policyholder's whole life (till 99 or 100 years), which means that the nominee will receive guaranteed benefits under the plan.
  • Q: What is the life insurance claim process?

    Ans: The life insurance policy can be claimed by following the below steps:
    • Claim Initiation: Inform the life insurance company about the policyholder's death as soon as possible in case of a death benefits claim. Submit the filled claims form along with all the necessary documents attached.
    • Claim Processing: The insurer will assess the claim's validity and revert back in case the claim is ready to be settled. The insurer will contact you on the registered contact details like mobile number and email address. Thus, you should make sure that the profile details are up to date.
    • Claim Settlement: The entire sum assured will be transferred to the nominee's account as per the chosen payout option, and the claim will be settled.
  • Q: Should the Claim Settlement Ratio be considered when selecting the insurer?

    Ans: Yes, you should always go through each company's CSR (Claim Settlement Ratio) before selecting the right insurer for yourself. The CSR of an insurance company can give you an insight into the company's claim settlement capabilities for your family's claim in the event of your unfortunate absence.
  • Q: What is the waiting period in a life insurance plan?

    Ans: The waiting period is the duration in life insurance during which the policy either does not offer any coverage or offers limited coverage benefits.
  • Q: What is the premium payment frequency in life insurance?

    Ans: The premium payment frequency refers to the number of times you need to pay the premium for the desired life insurance policy. Most policies allow you to pay the premiums in a monthly, quarterly, annual, or semi-annual mode.
  • Q: Is buying life insurance riders without the base plan possible?

    Ans: You can only buy a life insurance rider with the base plan. This is because riders are supplements added to the base plan to enhance its coverage; with the base plan, they can be bought individually.
  • Q: Will I receive a return at the time of life insurance maturity?

    Ans: Depending on the policy T&Cs you may receive a maturity benefit at the end of the policy term in case you outlive the policy tenure. This way you can understand the importance of life insurance and see if the life insurance of your choice provides a maturity benefit or not.
  • Q: When does my Life Insurance policy terminate?

    Ans: Your life insurance policy ends at any of the following instances, whichever happens first:
    • When you have outlived the policy tenure
    • When you suffered an unfortunate death, and your family has claimed the death benefit
    • When you failed to pay the premiums on the due date and the policy lapsed
  • Q: How many riders can I add to my life insurance policy?

    Ans: You can add as many riders as you want to the base life insurance plan. However, it is important to note that the premium rate will increase with each rider addition.
  • Q: Should you buy life insurance only for the tax benefit option?

    Ans: You may buy life insurance for tax benefits under sections 80C, 80D, and 10(10D) of the Income Tax Act. However, it's essential to consider your long-term life goals, such as education expenses and retirement, and secure your loved ones with sufficient coverage to overcome life's uncertainties.
  • Q: What is the need for life insurance?

    Ans: The need for life insurance is explained as it provides financial security and peace of mind to your loved ones in case of your unexpected absence. It helps cover outstanding debts, replace lost income, and ensures your family's well-being, making it a vital part of responsible financial planning.
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