Life is beautiful, but also full of uncertain things.
Life insurance works as a contract between the insurance company and the policyholder. It pays a specific sum to the insured individual’s family upon his death.
The life insurance sum is paid in exchange for a specific amount of premium. It is wise to have life insurance. A contract with an insurance company is known as life insurance.
It is important not to take anything to chance, especially ‘life insurance’. The only certain thing in life is Death apart from taxes, it pays to insure it well in advance.
If you were to go by the dictionary definition of life insurance. Then it works as the financial product that pays you the sum of money either after a set period or upon your death.
“Life insurance premium” is the amount of money you pay your life insurance company in exchange for your coverage. A regular monthly/annual payment or a one-time payment is a life insurance premium.
What is the payout and what does it stand for in life insurance policy?
It is the amount of money that an insurance company pays to your beneficiaries after your death.
Know the Benefits of Life Insurance
- Life insurance policy, aids in minimizing the impact of the financial loss to a family. It provides assurance to the insurer that in case of his/her sudden demise, it will help the family to survive.
- Facilitating a lump-sum payment to the insurer’s family is life insurance’s major advantage.
- Providence of an adequate amount of cash post-retirement and deduction in tax makes it different from others.
- Tax-free death benefits and estate tax-free schemes relieve elderly people.
It treats cash withdrawals on a first-in-first-out basis. It also allows cash-value withdrawals to the limit of the total premiums paid are usually income-tax-free.
- Most of these life-insurance policies loans sanctioned are tax-free and contain no interest.
- It also allows one to exchange his current life insurance policy with another. Moreover, this policy exchange policy remains tax-free.
Who Should Buy Life Insurance?
Life insurance provides financial support to beneficiaries after the death of an insured person. Here are some examples of people who may need life insurance:
a) Parents with minor children – If a parent dies, the loss of his or her income could create a financial issue. Life insurance makes sure the kids will have financial stability by which they can get big help.
b) Parents with special-needs adult children – Life insurance fulfills their needs after their parents pass away and will take care of their livelihood too. These children require care throughout their life.
c) Adults who own property together – Life insurance can be a good idea in case of married or unmarried, death of anyone adult could mean the loan will be unaffordable.
d) Elderly parents who want to leave money to adult children who provide their Care – In many families young children have to sacrifice their life and dedicate it in taking care of the elderly person who is in need to be taken care of, including financial support.– Life insurance can help reimburse the adult child’s costs when the parent passes away.
e) Young adults whose parents incurred private student loan debt or cosigned a loan for them – Child in the family without dependents rarely need life insurance, but if in case the parent will be on the hook for a child’s debt after his or her death, the child may want to carry enough life insurance to pay off that debt. That could create big trouble for the child.
f) Young adults who want to lock in low rates – The younger and healthier you are, the lower your insurance premiums. A 20-something adult might buy a policy even without having dependents if there is an expectation to have them in the future. This is one of the best choices made.
g) Wealthy families who expect to owe estate taxes – Life insurance can provide funds to cover the taxes and keep the full value of the estate intact. Hence many families who expect to owe estate taxes go for having insurance.
h) Families who can’t afford burial and funeral expenses – People are unaware of having small life insurance to utilize in the case of loss of life and to do last rituals with good arrangements. A small life insurance policy can provide funds to honor a loved one’s passing.
i) Businesses with key employees – If the death of the main person or employee, for example, CEO, can create a serious financial hardship for a firm, that firm may have an insurable interest that will allow it to purchase a life insurance policy on that employee. Hence life insurance can be of great help.
j) Married Pensioners – People getting a good amount of pension can invest by having a life insurance policy Instead of choosing between a pension payout that offers a spousal benefit and one that doesn’t, pensioners can choose to accept their full pension and use some of the money to buy life insurance to benefit their spouse.
k) The average density of life insurance in India is around 2.76%. There have been improvements in this area but overall the growth has been rather slow in India. Many people are not aware of the benefits of life insurance and the numbers for penetration are an indicator of the same. Even many are not aware of various types of life insurance.
l) Accidents are strong indicators of how uncertain human life can be and how we need to completely insure our lives. Hence life insurance can be a very important tool for providing safety and security to a family. It acts as a protective cover to safeguard the insured’s dependents.
In the event individuals do not insure their lives, their dependents end up facing the tragic loss of their loved one along with a whole host of liabilities such as rent, loans, etc. Life insurance is the best gift you leave behind for your loved ones once you are not there to fulfill their requirements.
Life insurance and life insurance plans are an absolute necessity today. Life insurance is a risk minimization and protection tool that can help insured and their dependents in many ways while dealing with a variety of life events. By understanding the key features and benefits of a life insurance policy, you can make an informed decision. Thus, People should be aware of the need for and importance of Life Insurance.
“In case you can’t be there to catch them, make sure you leave a safety net”.