Life Insurance: A good investment option?

Before weighing the pros and cons of investing in a life insurance policy, it is crucial to understand what life insurance is all about. Essentially, life insurance is not an investment product, but a protection plan. However, many life insurance policies offer an element of investment, savings and return on investment along with insurance coverage, i.e. protection for one’s life, it is often considered as one of the investment products. 

But is Life Insurance a good product at all?

Just like any financial decisions that you might be making in your life, it is essential to understand first if life insurance is right for you. There are various factors that you might have to consider to figure that out, regardless, it is the most important aspect to it.

There are different kinds of life insurances to meet your different financial goals. So, you can take a look at the types and decide which suits you best with ample help.

Who is life insurance for?

Anyone who has dependents, for whom you are financially responsible,  need life insurance. Thus, your dependents could be your spouse, sibling, parents, children or even your company. So, if you are the bread-earner of the family, you need life insurance. If you stop earning, your family would have financial instability, then you need life insurance. Basically, anyone and everyone on whose income the family runs needs life insurance.

How much of life insurance coverage you need is a question which you might want to figure out, but that largely depends on your income and expenses, dependents and your lifestyle. 

However, there is a straight answer to that too, which is about 10 to 20 times your annualised income would suffice to start with as a life cover.

Why Life Insurance is a good investment instrument

Now, there could be multiple reasons why life insurance but here we have enlisted only the top 4 reasons.

1. Financial Security:

The biggest issue that life insurance policies solve is financial instability. 

From short-term financial goals to child’s education to retirement to unexpected expenses, life insurance plans help you to navigate our family through it securely in various stages of life. 

Thus, meeting all your financial requirements, even if you happen to die early in life.

2. Planning requires time:

You might be a working bachelor today, but fast-forward a few years from now, you could be married or have other financial responsibilities or may plan to buy a dream car or house. Also, you would have a retirement planned sometime or maybe a business venture. 

To ensure that the financial burden does not take you down, it is important to plan earlier. There are many insurance plans you can choose from. 

3. Long-Term Goals

Your long-term financial goals need to be fulfilled, with or without your presence like children’s education. Such goals can never be compromised. Thus, having your plan B with life insurance policies with adequate coverage is of extreme importance!

4. Life stage requirement

The bright side of life insurance plans is that there is an insurance plan for every stage of your life. From term insurance that provides complete financial security for your loved ones  to an annuity plan that helps in your retirement. There are multiple life insurance plans to choose from to meet every life stage’s financial goals. 

5. Tax Benefit

Life insurance plans should never be purchased for tax benefits. But, it is definitely an additional benefit of buying a life insurance plan in India. The premium paid towards a life insurance plan is tax-free under section 80C of the Income Tax Act, 1961 upto INR 1,50,000 per annum. And, pay-outs are also tax exempted under section 10(10D) of the Income Tax Act, 1961, however, the tax exemption will be as per the life insurance plan opted and premium paid towards it. 

Things to consider before buying a life insurance plan:

Here are the top #3 things to consider while opting for a life insurance plan which best suits your needs are:

1. Starting early:

Starting early when it comes to buying life insurance has its own perks. For one thing, the premium amount is comparatively lower and acts as a good financial investment. It also makes sure to secure your family if anything unexpected happens to you.

Also, life insurance policies are easily underwritten and issued at a younger age than older as the complicacy increases. Thus, it makes super sense to avail a high life insurance policy when you are young. You can always choose to increase the coverage at a later point of time if the premium is a consideration.

2. Choosing the right fit:

Today, there is a wide range of life insurance policies to choose from and it becomes increasingly important that you find your ideal fit with awareness and patience. You need to be clear of what your requirements are and thus choose a plan that goes with it.

3. Fine prints:

Life insurances usually come with tricky terms and conditions. You need to choose the one which best suits your needs. Hence it is crucial to read through the fine prints and know your insurance well enough. 

Conclusion:

Like every financial decision, life insurance plans to have their own advantages and disadvantages. However, you can always benefit from one if only your expectations and goals pertaining to it is clear. Thus, it is important to evaluate yourself and your needs to wholly understand if life insurance is for you.