Life can be uncertain and full of surprises. A man may plan for a lot of things in life but the uncertain nature of life can lead of a dismal scenario in case of poor financial planning. Life insurance is a wonderful tool to create a cushion as far as financial perspective is concerned to counter any mishaps or unfortunate incidents. Life insurance is a tool that provides financial security and protection to the family of the individual in case of his or her untimely demise. With rising inflation and mounting expenses, without life insurance plans, catering the financial needs of even a small family after the death of the earning member of the family can be serious problem. Life insurance not only provides the basic financial protection but also doubles up as an investment vehicle depending on the type and plan of insurance policy selected.
Reasons for Buying Life Insurance:
Various people buy life insurance plans for different reasons but the top three reasons for buying a life insurance plan are as discussed below. Users may select different life insurance plans as per their requirements but are advised to make sure they cover all the three basic blocks as listed below.
Understanding Types of Life Insurance:
Life insurance comes in various types and choosing the right insurance plan for one's requirement holds the key. There are a wide range of insurance plans and schemes available in the market today. Before investing in any of the life insurance schemes one must understand the basic difference between such insurance policies.
Term Insurance for example is one of the most popular insurance policies but is a time centric policy with low premiums. In case of the death of the insurance policy holder the dependents receive the benefit amount. In case of maturity of the policy usually no amount is paid to the policyholder. Endowment insurance plans on the other hand offer an accumulated bonus and work by generating a monthly income or pension for the rest of the life for the policyholder. Life insurance companies have come up with various money back plans where the policyholder receives a percentage of the sum assured during his or her lifetime.
Reasons for Buying Life Insurance:
Various people buy life insurance plans for different reasons but the top three reasons for buying a life insurance plan are as discussed below. Users may select different life insurance plans as per their requirements but are advised to make sure they cover all the three basic blocks as listed below.
- Protection: Life insurance by its very basic nature has been designed as a protection plan to counter any unfortunate incidents leading to loss of life of the policy holder. Investing in a life insurance plan offers peace of mind to the individual knowing well that his or her family would have their financial needs well covered even in the unfortunate case of his or her untimely demise. Any loss of income due to illness or accident not leading to death is also covered under various life insurance plans.
- Wealth Creation: Apart from offering the basic life protection, insurance policies also double up as good investment vehicles for wealth creation. Unlike bank fixed deposits and debt bonds, insurance plans come in various wealth creation possibilities offering users a multiple advantage of increasing their investment over a period of time. For example Life insurance policies like Unit-linked insurance plans (ULIPS) invest part of the premium in mutual funds and the equity market. Of course the wealth creation works silently as the policy covers its basic aspect of offering life protection cover.
- Tax Benefits: Life insurance policies come with an added tax benefit and a large number of people use the life insurance route to save some of their tax obligations. While investing in a life insurance for saving tax must not be the sole criteria for buying a life insurance plan, it must always be considered as an extra additional benefit apart from basic protection and wealth creation.
Understanding Types of Life Insurance:
Life insurance comes in various types and choosing the right insurance plan for one's requirement holds the key. There are a wide range of insurance plans and schemes available in the market today. Before investing in any of the life insurance schemes one must understand the basic difference between such insurance policies.
Term Insurance for example is one of the most popular insurance policies but is a time centric policy with low premiums. In case of the death of the insurance policy holder the dependents receive the benefit amount. In case of maturity of the policy usually no amount is paid to the policyholder. Endowment insurance plans on the other hand offer an accumulated bonus and work by generating a monthly income or pension for the rest of the life for the policyholder. Life insurance companies have come up with various money back plans where the policyholder receives a percentage of the sum assured during his or her lifetime.