We might hate to admit it but the risk of death or disability due to natural or unintentional causes exists in human life. Not only the emotional loss, but the household can suffer an income loss when a person dies or becomes permanently or temporarily incapacitated. Life insurance can act as a safety net and a saving instrument that helps in providing financial freedom during old age and helps to reduce tax liability.
Thereby, an agreement between an insured and a life insurance provider is called a life insurance policy. It is the promise of payment of a guaranteed sum in return for regular premium payments at maturity or in the event of the unfortunate demise of the insured. In other words, it is a financial safety net for the family if the insured meets with tragic events such as death, disability and accident.
Why is Life Insurance Required?
1. Secures Financial Future
Financial security for a family is the main goal of life insurance. In case the insurer passes away, their loved ones won't suffer financially, thanks to life insurance. Although there is no way to replace a loved one, planning with life insurance does help to meet the family's financial demands. It is suggested that individuals go through multiple life insurance quotes before buying insurance.
2. Accomplish Financial Goals
Every individual has financial objectives in life. By assisting people in creating a financial foundation, life insurance policies assist people in achieving these goals. Plans for life insurance encourage diligent saving. Individuals might accumulate funds by making monthly insurance premium payments.
3. Brings Peace of Mind
Individuals feel more secure knowing they have life insurance. Life is unpredictable, but life insurance can provide financial support to a policy holder's family in the event of their passing. Apart from life insurance, it is also suggested to invest in monthly investment plans to grow your savings. If you are wondering what is monthly investment plan, it is a plan that pays the depositor a particular amount in exchange for regular premium payments. This amount can be a sum guaranteed to the investor or profit accumulated during the investment tenor, depending on the nature of the plan chosen.
4. Tax Saving
According to Section 80C of the Income Tax Act of 1961, a policy holder can typically claim a tax deduction for their life insurance premiums. According to Section 10(10D) of the Income Tax Act of 1961, compensation for death claims is tax-free.
5. Dependent Spouse
An individual must purchase a life insurance policy if their spouse depends on them financially. This will make sure that in the event of their absence, their spouse can live independently without worrying about financial aspects.
6. Leave a Tax-Free Legacy
Due to Section 10(10D) of the Income Tax Act of 1961's tax-free treatment of life insurance payouts, a policyholder can leave a tax-free legacy for loved ones.
7. Retirement Planning
Life insurance plans can help people invest and save funds for retirement so they can live comfortably once they retire. By getting life insurance quotes, they can plan their premium accordingly.
How to Determine the Right Life Insurance Policy?
1. Assess Life Insurance Goals
Individuals may have different goals. With the aid of a proper life insurance policy, individuals must choose plans as per their life insurance objectives.
2. Calculate Optimal Insurance Coverage
According to financial advisors, Life insurance coverage should be at least ten to fifteen times an individual?s annual salary. When determining the optimal life insurance sum, there are several factors to consider like age, financial goals, approximate cost of living, and debts. A life insurance coverage should be chosen keeping all these factors in mind. It is important to ensure that the coverage you choose should be adequate to meet all these financial requirements. If not, then significant savings should be coupled with a life insurance policy to take care of such expenses.
3. Determine Premium Amount
The amount of premium one must pay for the necessary amount of life insurance can be calculated using online premium calculators. Find a policy that delivers the best coverage at a price that fits an individual?s budget by comparing various life insurance quotes.
4. Select the Right Policy Term
The appropriate duration of the policy term is the period during which their family will be financially dependent on them. The usual rule of thumb is to subtract their current age from the age at which they aim to achieve a certain life goal in order to determine the optimum insurance term.
5. Opt for Reputable Life Insurance Provider
Reliable life insurance providers often have a Claim Settlement Ratio (CSR) of over 95% over several years. The CSR is the proportion of claims that were settled by the company within a fiscal year as opposed to the total number of claims filed. People can check the most recent CSR of the various insurance carriers in India by going to the website of the Insurance Regulatory and Development Authority (IRDAI).