The importance of Life Insurance for financial security
cleartax.in 04-12-2017 10:10:48 AM
The sudden and untimely demise of a family member is something that we don’t typically want to think about. But we should. You should think about this deeply if you’re a senior member of your family, more so if you’re the breadwinner. You should think about what will happen to your family in case of you’re not around anymore. This is a difficult subject to consider, but an important one. Read More
Your family would be emotionally broken in such a situation, but they shouldn’t be financially broken as well. The one way to ensure that your family is taken care of financially after you is by purchasing life insurance.
Life insurance is an agreement between the insurance company and the policyholder. According to the agreement, the policyholder pays a premium amount for the term of the policy and in return gets a cover for a specific amount. This cover is usually much higher than the premium paid. In case of the demise of the policyholder during the term of the policy, the insurance company pays this cover amount to the policyholder’s family.
This is essentially how life insurance works. Life insurance is supposed to be considered as an expense. There are some types of life insurance policies that provide investments or periodic income, but they don’t fulfill the purpose of life insurance adequately. The goal of a policyholder should not be to get something out of life insurance. The goal should be just financial protection in case of an untimely demise. This is why term insurance is the best kind of life insurance. It provides cover for a big amount at a lower premium.
Life insurance should ideally be bought at a young age. The younger you are, the cheaper the premium will be. Young earners in their 20s typically don’t think of life insurance because they don’t have dependants at that time. But later on in life, you will start a family and life insurance at that later stage will be more expensive. Hence, it is best to start with a term insurance policy at a young age.
Apart from this, the other benefit of life insurance is that the premium can also be claimed as a tax-saving deduction. The Income Tax Act has a Section 80C under which up to Rs.1.5 lakh can be claimed to reduce your taxable income at the time of filing income tax returns. Life insurance premium is one of the expenses that can be claimed under Section 80C.
Life insurance can be bought online as well as offline. Whatever mode of purchase you choose, make sure you don’t procrastinate and buy life insurance as soon as you can.