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Features
Ref. No. KLI/22-23/E-BB/492
Life insurance provides peace of mind and financial stability, acting as a safety net for your dear ones. Beyond providing security, it also serves as a wealth-building tool with tax benefits and added perks like riders.
What comes to your mind when you hear the words “life insurance”? For many, it is a plan to ensure their family’s financial well-being in their absence. But the benefits of life insurance go far beyond just that. From wealth creation to tax advantages, a life insurance policy offers several advantages that make it perfect for your financial toolkit.
Let us explore the “what” and “why” of life insurance and discover its various benefits through this blog.
When you are starting a family or even just thinking about the future, financial planning becomes essential. It is about managing your income wisely, covering your expenses, and setting aside funds for big milestones like your kids’ education, buying a home, or even enjoying a peaceful retirement. Life insurance fits into this by offering two key benefits: protection and growth.
The primary goal of life insurance is to ensure that your family is financially secure in your absence. The death benefit can take care of their immediate needs, like household expenses, debts, or education fees. But that is not all! Many life insurance policies also double up as a savings or investment tool, helping you build wealth over time. Plans like ULIPs or an endowment policy can give you returns while keeping your money safe. And let us not forget the tax benefits under Section 80C. By investing in life insurance, you are not only securing your family’s future but also saving money on taxes.
The earlier you start, the better. A policy taken when you are younger means lower premiums and more time to enjoy the advantages of life insurance.
Financial security and peace of mind are great, but is that all that a life insurance plan offers? Read these key benefits of life insurance to understand what all it offers:
The first and most important benefit of life insurance is financial security for your family when you are not around. It makes sure that your loved ones can manage their expenses and maintain their lifestyle by paying for necessities like education or medical bills. The death benefit acts as a financial cushion and lets your family focus on healing rather than worrying about making ends meet.
Another advantage is that such a policy helps you create wealth. Certain plans like ULIPs (Unit Linked Insurance Plans), let you invest while stayed insured. This means that a portion of your premium goes into investments like equity funds, which can help grow your wealth over time. This combination of savings and security makes life insurance a great tool for building a financial future.
Taxes can generally be a hassle, but what if we tell you that you can get tax benefits with your life insurance? The premiums that you pay are eligible for deduction under Section 80C of the Income Tax Act, and the payouts from your policy are often tax-free under Section 10 (10D).
This is one of the most important aspects of life insurance. If you are no longer around, the death benefit ensures your family gets a lump sum payout. This money can help them pay off debts, manage household expenses, or even fund their children’s education. Knowing your loved ones are financially secure can give you immense peace of mind.
If your policy reaches its term and you are alive, you get something called maturity benefits. This is a payout that includes the sum assured and any bonuses you have earned. Think of it as a reward for staying committed to your policy. It is a great way to fund long-term goals or enjoy a stress-free retirement.
Life insurance policies can be customized with riders or add-ons that provide extra benefits for a small additional premium. For example, you can opt for a critical illness rider, accidental death rider, or waiver of premium rider. Instead of buying multiple policies, these riders let you enhance your coverage cost-effectively. It is like upgrading your phone plan to get more perks!
Life insurance also steps up during tough times. If you are diagnosed with a chronic or terminal illness, some policies allow you to access a part of the sum assured to fund your treatment. This benefit can be a lifesaver, helping you manage expensive medical bills without dipping into your savings.
The need for life insurance or annuity plans depends on your responsibilities and financial contributions. Let us break it down into simple terms for different scenarios:
If you are the one who keeps the financial wheels turning in your family, life insurance is a must. This is because if you are the sole breadwinner for your family and pay the majority of the bills, a life insurance policy ensures your family does not face a financial crisis in your absence. It can help pay off loans, cover living expenses, and even fund your children’s education.
Being a parent comes with its own set of challenges, right? You are responsible for your kids’ upbringing, education, and overall well-being. A life insurance policy acts as a safety net for your children, so even if something unexpected happens to you, the insurance payout will secure their future and give them the stability they need.
When you are married, it is not just “me,” it is “we.” Whether both partners work or just one does, financial responsibilities are often shared. If one partner passes away, the other might struggle to manage expenses like EMIs, household bills, or even plans for the future. A life insurance policy provides the surviving spouse with the financial support they need to stay afloat.
Not all dependents are children or spouses. It could be your elderly parents, siblings, or even someone who relies on you for financial support. If you have anyone depending on you, life insurance ensures they are taken care of, even if you are not around. It is like leaving behind a gift of love and responsibility.
Retirement is meant to be your golden years, not a time to stress about money. If your job does not come with a pension or if you want to ensure a steady income post-retirement, certain life insurance policies can help. Plans like annuity-based life insurance provide regular payouts, making your retirement stress-free and financially secure.
When you are thinking about buying a life insurance policy, it is not just about knowing what are the advantages of life insurance. You also need to consider a few important things to ensure you are getting the best plan for yourself and your family.
The policy amount you choose should be enough to cover your current expenses, future financial goals, and any debts you might leave behind. If your coverage is too low, it will not provide the financial security your loved ones need. Take a good look at your lifestyle, responsibilities, and plans for the future before deciding how much coverage you need.
Paying for your policy should fit comfortably into your budget, and thankfully, insurance companies give you plenty of options:
How long you need the policy depends on how many years your family will depend on you financially. Ideally, you should pick a term that lasts until you reach retirement or a specific financial milestone, like your child’s education. Longer policies often come with lower premiums, but make sure the term aligns with your needs.
You know that tiny text at the bottom? Do not skip it. The terms and conditions will tell you exactly what the policy covers, what it does not, and the scenarios where a claim might be rejected. It might feel like boring legal stuff, but reading it carefully could save you from surprises later.
Imagine your family needing to claim the benefits only to face endless delays. That is where the Claim Settlement Ratio (CSR) becomes important, as it is a percentage that shows how many claims an insurer settles each year. Always go for a company with a CSR of 95% or more. It is a sign that your family’s claims will likely be handled without unnecessary hassles.
Riders are add-ons that come at an extra cost but can provide valuable benefits. You can choose the riders that suit your life stage and needs for a more comprehensive safety net. Some popular riders include:
Whether you are looking for financial protection, investment options, or planning for your child’s future, life insurance offers a variety of plans to cater to your requirements. Here are some plans for you to consider:
Term insurance plans are the simplest and most affordable type of life insurance designed to financially protect your family if something happens to you. For this, you pay a premium, and if you pass away during the policy term, your family gets a lump sum amount to take care of their expenses. However, there is no payout if you survive the term, making it a pure protection plan.
ULIPs provide the best of both worlds by offering life insurance coverage and helping you grow your money through investments. A part of your premium goes towards life cover, while the rest is invested in funds of your choice, such as equity or debt. This plan is ideal if you are looking for a mix of insurance and investment. Plus, it lets you switch between funds based on your financial goals or market conditions.
This life insurance covers you for your entire lifetime, and unlike term insurance, this policy does not have a fixed duration. It provides a death benefit whenever needed, as long as the premiums are paid. It’s also perfect if you want to ensure your loved ones receive financial support no matter when you pass away. It can help in estate planning since the payout can be used to manage inheritance taxes or debts.
Endowment policies are a blend of insurance and savings. If something happens to you during the policy term, your family receives a lump sum amount (death benefit). But if you survive the term, you still get the maturity benefit, which includes the premiums you paid plus bonuses. In simpler terms, it is like having a financial safety net and a savings plan mixed into one.
If you prefer periodic returns during the policy term, a money back policy is the way to go. It provides regular payouts at fixed intervals (called survival benefits) to help you meet short-term financial goals. At the end of the term, you also receive the remaining sum assured and any bonuses as the maturity benefit. It is a great option for those who want a steady flow of money along with life insurance coverage.
Child insurance plans provide financial support for your child’s education, marriage, or other milestones, even if you are not around. You can plan ahead by investing in these policies to ensure your child’s dreams are never compromised, no matter what life throws at you.
Retirement plans, also known as pension plans, help you save up for your golden years. These plans ensure that you continue to receive a steady income even after you stop working. You can choose between options that provide regular payouts or a lump sum amount upon retirement, giving you the freedom to enjoy life without worrying about finances.
The benefits of life insurance go beyond just financial security. From wealth creation and tax benefits to tailored riders and comprehensive coverage, a life insurance policy is a must-have. Whether you are a parent, a working professional, or planning for retirement, life insurance fits into every financial plan seamlessly.
So, why wait? Check out the different types of life insurance plans, compare policies, and invest in the right plan for you!
1
Life insurance is a financial product that provides a payout to your family or dependents in case of your untimely demise. It helps secure their financial future by covering expenses like debts, education, or daily living costs.
2
The benefits of life insurance policy include financial security for your family, wealth creation through savings or investments, and tax benefits under applicable laws. It also ensures peace of mind, knowing your loved ones are protected.
3
Life insurance is crucial for protecting your family’s financial stability in case of unforeseen events. It ensures they can maintain their lifestyle, pay off debts, and handle other expenses even in your absence.
4
If you miss paying your life insurance premium on time, your policy can lapse after a grace period. This means you lose the coverage and benefits unless you reinstate it by paying the dues and penalties.
5
The number of riders you can add depends on the insurer’s policy. Common riders include critical illness, accidental death, or waiver of premium, allowing you to customize your plan as per your needs.
6
Yes, some life insurance policies offer lower premium rates for women, coverage for maternity or critical illnesses, and additional savings options, making it easier for women to secure their financial future.
7
Life insurance for senior citizens provides coverage for medical expenses, funeral costs, or loans. It ensures financial independence and peace of mind during their retirement years.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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