We never stop worrying about our future. Every decision we make today has a significant impact on our tomorrow. Amongst all the decisions we make for the future, our financial security is the most salient. With uncertainties tagging along at every step, we need to pay attention to the insurance plans we invest in and measures we undertake to save for the future.
However, with a million options in the market to invest and save, which plan should you choose? A great way to weave a financial safety net for your family and you is a Life Insurance Plan. The best life insurance plan covers a wide range of critical illnesses. In certain life insurance policies, you can add additional protection for your family.
What is life insurance?
Life insurance is a contract between an insurance policyholder and an insurance company or a bank. The insurer promises the policyholder to pay a sum of money in exchange for a premium after a set period or after the death of an insured person. It ensures the financial protection of your family after your death.
According to Statista, a total of 29 million new individual life insurance policies were issued in India in the financial year 2020. This is so because getting the best life insurance is a smart choice to invest in when you are young.
Life Insurance covers life risk and safeguards your family after you. You acquire lifetime coverage and not a limited period of security. You can also use the insurance money to pay your medical bills while being treated and possibly enjoy a good quality of life in your final months.
The beneficiaries should be chosen wisely as only they will be eligible to receive the amount. The insurance money payout can be done in many ways, like lump-sum payments, instalment payments, annuities, and retained asset accounts.
Types of life insurance
Essentially, there are two types of life insurance policies: Term life insurance and Whole life insurance. The policies then bifurcate into various types. The policies differ in terms of coverage and the benefits they offer, and are namely of the following types:
- Term Insurance policy
- Endowment plan
- Non-Linked Participating Endowment plan
- Unit Linked Insurance Plans
- Non-participating Non-linked endowment plan
Why is life insurance the safest way to save?
It is no lie that we save money for our survival in the future. Providing a living to your family is your responsibility, which has to be fulfilled at all times. Even though life insurance does not pay returns as the new age policies do, they are an extremely smart investment choice.
1. Security for your loved ones
Life insurance ensures that your family does not have to suffer when you are gone. You can invest money in life insurance and save for your child’s schooling or marriage, your old parents, or financial aid for your spouse. Also, life insurance plans take care of all the financial liability dealings for you in your absence. Your family will not have to deal with housing loans, personal loans, etc.
2. Accomplish long-term goals
Certain life insurance policies offer you capital appreciation along with life coverage. You can use this capital to invest in your dreams. Insurance policies like the Unit Linked Insurance Policies offer you opportunities to create wealth along with life coverage. This enables you to earn more money to invest and save.
3. Business can be safeguarded
Life insurance plans don’t just take care of your family in your absence. It also safeguards your business by paying money to the nominees of the deceased business partner and buying out the shares. Life insurance is a 360-degree safety net for your beneficiaries.
4. Income flow after retirement
Some life insurance policies like the Pension4Life policy offers you the benefit of guaranteed income for a lifetime after your retirement. Such life insurance policies help you manage daily expenses even after retirement.
5. Tax benefits
Under section 80C of the Income Tax Act, insurance policies provide tax benefits. Everyone wants to save tax money, and life insurances help you do so. An insurance policyholder is eligible for a maximum tax benefit of Rs. 1.5 lakh. You get safety as well as deferred tax.
Other than these reasons, it is advisable to invest in these life insurance policies at an early age. This gives a benefit of purchasing the policy at a lower premium and remains in effect if your health deteriorates in your old age. Some of the best life insurance plans help you in habituating to the discipline of regular investing and saving habits. You are at peace knowing that your family and loved ones won’t have to go through troubles to have a decent life after you.
How to choose the best life insurance policy?
You should only decide upon a life insurance policy after considering all the factors. If you want to invest in the best life insurance, keep in mind the following things while choosing a plan:
- The sum assured or premium should be at least 15-20% of your current annual income.
- Look for life insurance plans which provide regular income to your family in your absence. This will help better financial security.
- Your life insurance should enable you to buy suitable additional benefits like accident coverage, critical illness coverage, etc., based on your requirements.
- Do not get lured into life insurance plans that offer low premiums. Check for the credibility of the life insurance plan and then invest in them.
- Other factors like the claim settlement ratio, ease of applying, authenticity of the insurance company, etc., should be checked too.
One should always take their investments and saving plans very seriously and to make a well informed investment, it is very important to solve any insurance-related queries you might have, even if it is something as basic as “what is life insurance?”. The future of your family and you depend on it. Life insurance is your safest bet as it offers lifetime coverage, investment opportunities, retirement plans, saving opportunities, and debt clearance. It makes your life a lot easier. Think about your future and make your choices to live a peaceful life.