How Life Insurance Help you To Stay Financially Safe?
Life insurance is one of the most important investments to make for your life! Most people think that you need protection only for risk coverage. In fact, due to the bulk options available- people feel that it is more of a marketing gimmick which is sales based and financial discipline is all you need to live a stress-free life. However, it is challenging to forecast the future. You never know what unfortunate eventuality you get caught up in and your loved ones are left with no financial backing at all. Insurance is crucial even for a stress-free future where you spend your retirement years enjoying the life to the fullest. There are plenty of reasons to buy insurance, and there are plenty of types of life insurances that you can choose. Read on to know the advantages of securing your finances with insurance:
- Protect your family from any financial hardships
When the family’s sole earning member or even the highest earning member passes away, the family is thrust into a life of extreme difficulties. However, with the right steps, you can save your family from suffering after you. There are plenty of expenditures which get very difficult to take care of after the main income stops coming in. For government employees, there is still pension for the family to keep going but with people in private jobs or business holders, life insurance is the only solution to keep the family members standing up on their feet!
The pain of death by itself is quite tragic and add to it the pain of asking the near and dear ones for money- the situation becomes quite unpleasant. It is highly essential to keep your responsibility going until the family, or your dependents can find a way to get going in life again financially. While you have done everything you could for your family in your presence, this one last favor of keeping them financially safe after you are gone is one of the best things you can do for them.
- Don’t put them under the pressure of clearing off your loans
Although, most senior citizens of the country as well as people who have retired, make the decision of stopping an income only after their loans are clear- but there may be some people who still have the burden of a loan on their head. You can never predict what life throws at you. Which is why being prepared for every situation is crucial. In case of an unfortunate eventuality, life insurance is your best financial companion.It happens very rarely that you find somebody to pay off your loans. If you and your spouse are together clearing the EMIs (Equated Monthly Installments), then there is still hope for the loan sharks to not make your family life challenging. However, if you were the only one paying off the EMI, then your family will be caught in a complete rut in the absence of life insurance. Which is why getting a suitable policy with reasonable premium and good coverage is the best way to go when you can afford to pay a premium and making your financial future secure.
- Let your funeral be a peaceful event
It may seem like death is the ultimate solution to all your financial woes. But, the costs of the ceremonies alone become quite a burden for the family that remains behind. In fact, research shows that people who have a high economic stature have more expensive funerals. The costs of a funeral differ depending upon the religious beliefs of the person who has passed away. But, even if the dead body is to be burned, cremated, buried- the costs of all the ceremonies are quite high. Add to it, the expenditure of foods and gettogether of last rites, your family would not only be left with a huge hole in their heart but also in their pocket.
A good life insurance coverage will help you pay off these costs and let your funeral be a good memory rather than a painful one for your family! As you retire, you make different arrangements for your expenditures- however, a funeral is something that most people do not feel the need to plan. But, it is equally important and is quite an expensive affair for most. So, get a life insurance and ensure that your death is not more painful than it already is for your close ones.
- Keeps your money invested in the long term as well
Apart from the advantages that life insurance provides after your death, it is also considered to be a right way of investment for many reasons. While a term life insurance is not a good option for cash-based returns, permanent life insurance comes with many advantages regarding investment. Firstly, you get growth which is entirely tax-free. The cash value component of permanent life insurance comes with a condition where you do not need to pay any tax on the dividends that you earn. The feature of compound interest comes into play as well, when you keep your money invested for a long time. If you have term insurance, you will get that money with a possible no claim bonus but even with permanent life insurance, the premium multiplies with interest and regarding risk coverage, the more the money you have, the better it is! Apart from this, if you want to venture into the insurance investment market, then you can check out various endowment plans as well as a unit-linked insurance plan too.
You may also like to check retirement planning calculator.
- Makes your retirement lesser difficult on the pocket
With thousands of amenities for healthcare, the life spans of people are expanding majorly. It is excellent news for families that are financially secure, but it is an undeniable fact that medical expenses are quite burdensome too. Retirement sounds like the ultimate way to spend the last phase of your life, but if you have to spend even your retirement continually worrying about the finances, then it is not a great idea. Life insurance is quite an ideal tool for retirement planning. You can go for term-based life insurances that give you tax-free benefits on maturity or vesting. The premiums are tax-free as well, and there are so many options to invest in when it comes to this term as well as the permanent life cover. You can also invest in a ULIP or other insurance-based funds from an early age to get good returns. It can help you make your retirement much more comfortable.
Types of Life Insurance and why to invest in them:-
- Endowment Policy
An endowment policy is a way to invest in the insurance business. It is more of a savings policy than a risk coverage. These policies come with a specific maturity period, and the insurer finalizes the period. There are two ways to encash the money earned with this type of policy. One is to reap the maturity benefits once they come in and one is to claim the insurance in case of permanent disability or eligible mishaps. Endowment Policies are treated as safe investments and are quite popular in the low-risk investment circle. The dual benefit of having your dividends tax free as well as having a fund which protects you in case of an emergency makes these policies a great option to opt for. You can go for the LIC Endowment Plan or the Kotak Insurance Endowment Policy to reap the benefits of this category.
- Term Insurance
Term Insurance policies are quite popular as well. However, they are not a great option for investment or for people who start saving up with life insurance at a young age. They provide you with coverage only for the fixed term. If there is any single mishap(as mentioned in the policy) during this tenure, then the claims can be made, and the benefits can be reaped. However, if the claims have not been made during the tenure, then there is hardly any advantage of this particular policy for the future. Now the only benefit of term insurance is that you get the cover amount irrespective of the number of premiums paid. However, if you are all hale and hearty and pass this entire tenure without any problem, then you will not get any money back.
- Money or Cash Plans
This particular type of plan is probably the least popular of all the insurance plans in the market. However, it is highly beneficial. For one, it is more of a dual investment for you. One where you keep getting survival benefits and second is that you get complete coverage for the fixed term of this plan. Now, even though you can opt for these sums in different durations and keep enjoying the survival benefits, you are still given complete coverage for that fixed-term in case of an accident. Secondly, if there are no claims made during the time of the term, then you get maturity benefits as well. The most significant advantage here is that you get entire life coverage equal to the whole sum promised in case of a life risk wherein the amount is not compromised even if the sum has been paid to you in some installments previously.
- Whole life insurance
This is the most popular category of life insurances and in real sense fulfills all the motives that insurance has set out to do. In the case of a term insurance policy, you get benefits only for a fixed amount of time, but with permanent protection, you are covered for the entire lifespan. It is the best option for people who are sole earners in families and would leave a whole dependant family behind in case of an unfortunate eventuality. There are options available with various coverages and range of premiums for you. You can choose which one is the best and most affordable for you. In fact, they all come with a minimum term which you can keep renewing as you keep paying the premium. F you do not wish to pay any premium, then you can reap maturity benefits for your retirement as well.
- Childrens Policies
Everybody wants to give their children the best of everything. They want to set them financially for the future and protect them entirely from lack of money. Through their entire life, parents are always working for giving their children the privilege of a good education, a good career as well as a good marriage in many cases. However, all of these things cost money and as parents start to grow older, arranging for so much money can be a challenge. However, with children’s policies, you can use your money for investment and also for securing their future well. The children can reap the benefits of these policies once they have reached the eligible age for the goal you set out for them. They are a good investment for parents, especially for ones who have had a child at a late stage in their lives.
- Annuity Plans
An annuity plan is more or less like a pension plan. It is good for people who want to plan a retirement and have a secure future. In this, you can either invest all of your money or simply keep investing over time to get dividends for a fixed amount of time on a periodic basis. It does not provide any risk coverage or many benefits like the other categories of insurance, but in a way it helps you secure your retirement. You can retire peacefully without any stress of earning and figuring out from where you will arrange for funds. It is good to start with this plan early and invest as much as you can so that you get great returns for an extended duration in your life.
Investing in a life insurance is one of the most sensible decisions you can make for your financial future. It is crucial to include it in your portfolio of investments as well as in financial security. With thousands of options available, you can pick the best suited to your needs and life a carefree life.