Why do you need life insurance?

All of us may have different reasons for buying life insurance. But, the core motivation remains the same - providing financial security to our loved ones when we are not around. Most people can benefit from Life Insurance Policies. Here we discuss who should consider Life Insurance Policy and other vital components related.

What is a Life Insurance Policy?

It is a type of insurance that pays a lump sum to the policyholder's beneficiary if the policyholder dies unexpectedly. It is a contract between the insured and the insurance company wherein the insurer agrees to pay the sum assured to the insured's beneficiary if all the premiums are paid and the policy has not lapsed.

What is the purpose of buying a Life Insurance Policy?

You can buy Life Insurance for many reasons. Such insurance offers financial security to family members when they lose you. It may help them pay off debts, deal with day-to-day expenses etc,. Here are some solid reasons to buy Life Insurance Policy.

Provides financial support to family

 For many people providing financial security to their family after they are gone is the primary reason to buy Life Insurance. Having a lump sum amount in the family's hands will give them the power to deal with many financial issues.

Helps deal with debts

Many people borrow loans during their lifetime. It can be a home loan, personal loan, auto loan, etc. It can be challenging for a policyholder's family to deal with such loans when the borrower dies. Life Insurance can help families of policyholders deal with such financial liabilities.

Secures child's future

Parents put much effort into securing their child's future. Buying Life Insurance can help parents deal with their child's future expenses. Whether it is to pay for your child's education, tuition fee, wedding and other needs, the lump sum the family gets as a death benefit can help the surviving parent deal with all these expenses.

Helps create a steady source of income

Families with no financial obligations to deal with after the policyholder's demise can use the death benefits for investment purposes. Investing the amount will lead to a steady source of income for the family members and it can be used for various purposes.

Keeps business running

 Many business owners get Life Insurance to keep their business running after they are gone. Any debts or obligations can be covered when having Life Insurance. It keeps the policyholder's business running; hence their hard work doesn't go to waste in case of their untimely demise.

Helps save taxes

Another incredible purpose of buying Life Insurance is that it helps with saving taxes under Section 80C of the Income Tax Act 1961. The death benefits are also non-taxable under Section 10(10D) of the Income Tax Act 1961.Note: Life insurance plan tax benefits are available under the Old Tax Regime.

Who needs Life Insurance?

Here are a few examples of people that may benefit from buying Life Insurance.

Parents

Buying Life Insurance certainly makes sense if your children rely on you for financial support. It can ensure that their financial needs are handled if you die unexpectedly. Life Insurance Policy can ensure you will fulfil your duties and responsibilities towards your children even after your demise.

Spouses

Many people have financially-dependent spouses. If you have a spouse who depends on your income for day-to-day expenses and to maintain their standard of living, buying life insurance is an excellent idea. They can continue living without compromising on the standard of living in case you die unexpectedly.

Business owners

Businesses usually come with investment, inventory and sometimes debts. To protect their business and provide solvency, owners must opt for Life Insurance to let the company run smoothly in case of their demise. Life Insurance can ensure business debts are paid off without closing the business or burdening other partners.

Homeowners

Homeowners with debts to pay should go for a Life Insurance Policy. It will help ensure your loved ones are not burdened with paying off your debts after you pass away. Moreover, you will be at peace knowing your children and other dependents will not have to settle your obligations after your death.

Legacy purpose

If you have assets that you wish to pass on to your loved ones or any of your favourite charitable trusts, Life Insurance can be a good option for you. Even if you want to fund your relative's child's education or donate a sum to a hospital, your Life Insurance beneficiary can do the needful based on your wish.

What is the best time to buy Life Insurance?

Buying life insurance will make more sense when you have dependents or financial obligations that would impact your family after you pass away. However, the best time to get Life Insurance is when you are young. 

With age, the premium increases, so buying Life Insurance when you are young and healthy can bring down the costs. Moreover, getting approval for coverage might be challenging if you have any existing health issues. 

Also, Life Insurance costs will vary based on other factors such as health and occupation. 

For example, the premium for a 30-year-old non-smoker in good health will have less premium than a 55-year-old smoker. Similarly, a skydiving instructor must pay a higher premium than a school teacher as per the risk involved in their occupations. 

Whatever may be the reason for buying Life Insurance, getting it at a young age with no risky job or harmful habit will be much more affordable.

Frequently Asked Questions (FAQs)

Here are the answers to the given questions related to the why do you need life insurance?

What is the cost of Life Insurance in India?

The cost may vary based on factors such as type of Life Insurance Policy, age, health, occupation and lifestyle. The more young and healthy you are, the lower the policy premium will be. Also, the cost may vary from one insurance company to another. Hence, it is recommended to compare policies before buying. 

Can you change your life insurance policy?

Yes, it is possible to switch to a different policy or increase/decrease the coverage amount. However, the terms and conditions for policy may vary depending on the insurance provider.

Can you borrow a loan against your life insurance policy in India? 

Yes, borrowing a loan against your life insurance policy is possible. However, the terms and conditions for availing of the loan may vary depending on the insurance provider and policy type.

Is it necessary to disclose pre-existing medical conditions when buying life insurance?

Yes, it is necessary to disclose pre-existing medical conditions when buying life insurance in India. Failing to disclose such conditions may lead to the rejection of the claim in the event of the insured’'s death. It is advisable to provide accurate and complete information while purchasing life insurance.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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