Life insurance: Much more than an investment

Life insurance: Much more than an investment

Life insurance offers so much more than just a return on your money – we explore the benefits of buying a life insurance policy.

Buying life insurance in today’s uncertain times is a responsible act. It safeguards you and your family members against a future loss of income or your untimely demise. However, it is much more than just an investment option, because –

* It offers tax benefits. If you view life insurance purely from the prism of investment, then you must note that it offers tax breaks. Life insurance policy premiums are exempt up to Rs 1,50,000 per year under Sec 80C of the Income Tax Act, 1961. Critical illness riders offered with life and health insurance are exempt under Sec 80D of the IT Act.

* It is cheaper when purchased online. Leading insurance providers are using the Internet to connect with customers and offer an interactive experience at all touchpoints. Insurance providers encourage customers to buy life insurance online directly from their websites, without involving insurance brokers. Online life insurance policies are cheaper for two reasons:

  1. The operational costs of processing the policy online are quite low. These savings are passed on to the customer.
  2. Since there is no insurance broker involved, the insurance provider saves money on paying broker commissions – which is also passed on to the customer.

Also, young and healthy applicants are offered a lower premium to encourage them to buy life insurance online.

* You can borrow a loan against the life insurance policy. Another benefit of buying life insurance is that you can borrow money against it. The loan is offered based on the premiums already deposited with the insurance provider, and a percentage of the sum assured. This is a useful benefit in case you require money in an emergency. However, do check the rate of interest being charged on the loan, and make the repayment as quick as you can.

* They offer good returns on your investment. Most life insurance policy holders do not realise that the plan offers good returns on their investment. Except for term insurance, all life insurance plans offer maturity bonuses. Also, the invested money is returned in full as the sum assured, or as a death benefit in case of the untimely demise of the policy holder.

* They help you plan future financial milestones. Endowment and money back policies offer bonuses and periodic income, respectively. You are already aware of the tenure of the policy. So, you know when the sum assured corpus will be released to you, and what the probable amount will be. This helps you plan future milestones like children’s higher education, creating a retirement nest egg, buying a second car, etc.

* It gives you peace of mind. Buying life insurance ensures that your family members are protected from financial peril even in your absence. They can use the sum assured money to tide over their expenses till such time that an alternative source of income is found. You can use the insurance money to make many dreams come true.

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