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Benefits of life insurance in financial planning

By Viestories
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Life insurance is more than simply a tool for protecting your family's future; it's an essential component of overall financial planning. In India, where family values and financial stability are inextricably linked, the importance of life insurance goes beyond conventional protection. It serves as a financial backbone, providing stability and guaranteeing that your family's financial requirements are addressed even while you are absent. This makes acquiring life insurance quotes a must for everyone concerned about financial planning.

Benefits of availing life insurance policy

  • Financial security for family

Life insurance offers your family a financial safety net for the future, even when you are no longer here. Life insurance death benefit is the amount your family needs to maintain their present way of life, handle everyday expenditures, and ensure their financial future. It is even more important if you are the main income earner as it guards against the financial distress that could occur from losing the main source of income.

  • Wealth creation

Policies like whole life and endowment insurance have a double benefit. In addition to providing the death benefit, they also grow the cash value over the term of the policy. This cash value grows tax-free and can be accessible via loans or direct withdrawals, thus providing a financial reserve that can aid in wealth generation and serve as a financial cushion that can be utilised during your life.

  • Loan collateral

In some life insurance policies, the accumulated cash value can be used as collateral for loans. This is advantageous as it grants policyholders the chance to use the proceeds in times of need without being forced to sell other assets. It may be particularly handy for large spending like house purchases, children’s higher education, or business investment, and thus, create a convenient financial instrument that increases liquidity.

  • Tax benefits under section 80C

Premiums paid towards life insurance plans are eligible for tax deduction under Section 80C of the Income Tax Act. Thus, this benefit reduces your taxable income by Rs 1.50 lakh annually, which is a huge saving amount, and this makes life insurance a very cost-effective choice for your financial planning.

  • Additional 80CCD deduction for pension plans

Investing in pension plans linked to life insurance policies offers additional tax benefits under Section80CCD deduction, aimed at encouraging savings for retirement. This provision enhances your retirement savings and maximises tax efficiency, providing a dual benefit of long-term wealth accumulation and immediate tax relief.

  • Retirement planning

Some life insurance policies are specially designed to provide retirement income. The policies support the accumulation of a retirement corpus, which is paid out as a lump sum or annuity during your retirement years. This eventually leads to an income stream that is continuous even when regular earnings stop, thus providing stability and financial independence in old age.

  • Education fund for children

Life insurance policies if used strategically can be an asset to fund children's education. The lump sum of death benefit can be utilised to cover educational expenses which will ensure uninterrupted education for your children, more so, in the competitive educational arena of today.

  • Managing debt

Life insurance policies offer death benefits that can be used to cover debts like mortgages, personal loans, or credit card balances. This will ease the financial burden on them as they will not have to pay out from their estate or manage debts.

  • Business continuity

For a business owner, a life insurance policy is a must to continue the operation of the business even in his/her absence. The death benefit provides the necessary funds to keep the business running, allowing time for proper succession planning, or finding a suitable replacement, thereby safeguarding the livelihood of employees and the business's legacy.

  • Health and critical illness benefits

Life insurance policies usually allow riders that are aimed at providing additional cover against critical illnesses. These riders offer a lump sum that is paid at the time of identifying specific serious illnesses. In this way, they cover high medical costs and other related expenses without affecting the family finances.

  • Estate planning

The purpose of life insurance is to plan your estate efficiently and to ensure that your assets are transferred in an orderly manner. It helps cover financial liabilities and legal needs promptly. Moreover, life insurance can be designed to reduce estate taxes, thereby preserving more of your estate's value to go to your heirs.

  • Risk cover

Life insurance provides financial protection from life's uncertainties. It ensures that in the case of an unanticipated incident, your family's financial requirements are addressed, and they are shielded from financial problems, giving you peace of mind.

  • Flexibility to choose coverage

Life insurance plans include various coverage choices, premium payment schedules, and additional benefits. This flexibility enables you to design a policy as per your own financial status and family demands, making it a very flexible financial planning instrument.

  • Support in case of disability

Some life insurance plans include disability riders, which provide financial help if the insured becomes incapacitated due to an accident or sickness. This provision guarantees that the policyholder's and their family's financial requirements are addressed, serving as an important safety net.

  • Incentives for healthy living

Many insurers provide incentives such as decreased rates to people who live healthy lives. This benefits nonsmokers and individuals with minor health conditions, encouraging a healthy population while lowering total insurance costs. This not only promotes excellent health but also reduces the cost of insurance.

Why avail a life insurance cover right now?

The choice to get life insurance is frequently postponed; nonetheless, the optimum time to do so is now. Younger people benefit from reduced rates, and purchasing insurance early increases its financial advantages over time. Furthermore, the unpredictable nature of life necessitates obtaining life insurance coverage as soon as possible. Starting immediately guarantees that you optimise the financial stability and advantages provided by life insurance, making it a key component of your financial strategy. Obtaining competitive life insurance quotes and knowing the precise benefits of plans that are appropriate for your lifestyle and needs is the first step towards reaching this important financial milestone.