What are the advantages of life insurance?
There are numerous advantages to getting a life insurance policy.
• Financial Security/Peace of Mind
Having life insurance gives you the greatest sense of security. This is because if someone passes away, they may rest assured that their family and loved ones will be financially secure. We all have financial obligations but having enough life insurance ensures that your debts are covered and loved ones are financially protected in the event of your untimely death.
• Creating Wealth
Some types of life insurance policies also give you the chance to build wealth. Apart from providing life insurance, these policies invest your premium in a variety of investment classes to provide market linked returns and help you build your savings.
• Savings on taxes
Life insurance policies have two tax advantages. The premiums paid are eligible for a tax deductible under Section 80C of Income tax Act 1961, subject to provisions stated therein. Currently, you can deduct up to 1.5 lakh in premiums from your gross income each year, cutting your tax bill. The maturity insurance plans, on the other hand, may be completely tax-free. This tax is provided under section10 of Income tax Act 1961, subject to provisions stated therein.
• Purchase when you’re young and save more
Life insurance products allow you to lock in inexpensive premiums while you’re still young. You may have to pay a much greater premium if you buy the same insurance when you are older, than you would, if you bought it when you were younger.
Wrapping Up
Different life insurance policies operate in a variety of ways. A ULIP has multiple factors, whereas a term insurance plan is basic and easy to understand. Different investment funds, as well as a variety of portfolio management methodologies, must be considered while buying a ULIP. term insurance, on the other hand, provides only protection and does not include any investment component.
Insurance benefits individuals, organizations and society in more ways than the average person realizes. Some of the benefits of insurance are obvious while others are not.
- The obvious and most important benefit of insurance is the payment of losses. An insurance policy is a contract used to indemnify individuals and organizations for covered losses.
- The second benefit of insurance is managing cash flow uncertainty. Insurance provides payment for covered losses when they occur. Therefore, the uncertainty of paying for losses out-of-pocket is reduced significantly.
- A third and uncommon benefit of insurance is complying with legal requirements. Insurance meets statutory and contractual requirements as well as provides evidence of financial resources.
- Another very important benefit of insurance is promoting risk control activity. Insurance policies provide incentives to implement a loss control program because of policy requirements and premium savings incentives.
- The fifth benefit of insurance is the efficient use of an insured’s resources. Insurance makes it unnecessary to set aside a large amount of money to pay for the financial consequences of the risk exposures that can be insured. This allows that money to be used more efficiently.
- Another uncommon, important benefit of insurance is support for the insured’s credit. Insurance facilitates loans to individuals and organizations by guaranteeing that the lender will be paid if the collateral for the loan is destroyed or damaged by an insured event. This reduces the lender’s uncertainty of default by the party borrowing funds.
- The seventh benefit of insurance is it provides a source of investment funds. Insurance companies collect premiums up front, invest those premiums in a variety of investment vehicles, and pay claims if they occur.
- The last benefit of insurance is reducing social burden. Insurance helps reduce the burden of uncompensated accident victims and the uncertainty of society.
Understanding these benefits is critical when analyzing the need for insurance and helps insureds justify the purchase of insurance.
