Life Insurance

How Life Insurance Help You To Stay Financially Safe

Nov 17, 2021

How Life Insurance Helps You To Stay Financially Safe

Mihir was a 32-year-old doctor who lived a happy and financially sound life with his wife and young daughter. It was all going well for the family when one day Mihir met with a road accident and passed away. His wife, who was a homemaker, was emotionally shattered but thankfully, Mihir had made multiple life insurance investments and that helped her and her daughter immensely. She received the term insurance coverage and promptly paid off the home loan with a part of it, ensuring she always had a roof over her head. She invested the remaining money in an income scheme. She also got to know that Mihir had bought a child plan and that would take care of their daughter’s further educational milestones, while the premiums would be waived off. With these assurances, she was able to pick up the pieces and start a new life with her daughter while being financially safe, thanks to the efforts made by her late husband.

Life insurance - financial assurance

As we saw from the illustration above, buying life insurance can keep your family safe from many shortcomings. It can also help you meet your future financial aims. Thankfully, there are many forms of life insurance that help you to protect yourself as well as your loved ones. You need to assess your needs and choose the most appropriate cover, based on what your requirements are.

Forms of life insurance and how they help

Here’s a look at some of the most helpful forms of life insurance and how they can help you to stay financially safe:

  • Term insurance - Term insurance is an inexpensive form of life insurance that helps your family after your death by offering the sum assured. You can choose for a staggering payout which can work as your income replacement or a lump sum payout, depending on what your family needs.
  • Endowment insurance - This is a type of insurance where you get a life cover and also a chance to save for your future. If you die, your family receives the death benefit. However, if you outlive the policy period, you get a maturity benefit with which you can buy a house, go on a world tour, etc.
  • Child plan - This is an excellent form of life insurance where the beneficiary is your child you get regular payouts at fixed intervals with which you can pay for your child’s educational milestones, help her to set up a business or even pay for her marriage. If you die, the premiums get waived off but she remains to get the payouts and her financial journey becomes smooth. 
  • Retirement plan - A retirement plan helps you to build up a retirement corpus that you can use in your twilight years. You can save in small amounts all through your working years and have enough money to live life on your own terms for as long as you live.
  • ULIP - A ULIP is an excellent investment tool that also offers a substantial life cover. The ULIP gives you an opportunity to invest in the financial markets without having to face too many risks as your life stays insured at all times. You can choose the type of fund you want to invest in and get heavy dividends with which you can amass a large wealth.

All the life insurance plans also offer a tax rebate which further helps you to strengthen your finances and stay monetarily safe. You get a tax rebate of up to INR 1.5 lakhs a year for the life insurance premium you pay, under Section 80C of the Indian Income Tax Act.

Add-on covers to stay financially safe

When buying life insurance, you can also opt for some riders which are add-on covers. While a majority of the life insurance benefits are available to your beneficiaries after your death, the add-on covers can help you stay financially safe while you are alive. Here is a list of the most effective life insurance riders:

 

  • Critical illness rider - This is one of the best life insurance riders where you get a lump sum amount when diagnosed with a critical illness. You can use that money to get treated, clear some loans, etc.
  • Disability rider - If you are left with a disability after an accident, you will get a sum assured. You may lose your job due to your inability to work and at such a time the financial aid can be of great use.
  • Accelerated death benefit - The accelerated death benefit rider pays a part of the sum assured when you are diagnosed with a terminal illness. You can use that money to pay off loans, pay for the medical bills, etc so that after your death, your family doesn't get financially burdened.
  • Waiver of premium - If you lose your ability to earn a livelihood due to an illness or injury, all future premiums of your life plan will get waived off. The plan however will remain active and all the benefits of the cover will still be available to you and your family. 

These are some of the most useful life insurance riders that you may consider buying. If you have these riders with you, you can get a lot of financial support during the economically challenging times.

To wrap it up

Your life insurance plan can offer many financial benefits to you as well your entire family and that too at various stages of life. You need to choose your plan carefully to ensure you receive the maximum amount of coverage from it. Go over the clauses and terms of each policy, weigh them against your requirements and get all the support you need to stay financially safe.

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