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12 Reasons to Buy in Life Insurance

Life insurance offers financial protection and peace of mind for your loved ones in case of your demise. It provides stability and support during challenging times while securing their future.

  • 5,271 Views | Updated on: Jul 03, 2024

Among the plethora of investment options available, life insurance stands out as a cornerstone of financial planning. It not only provides a safety net for your loved ones in case of your untimely demise but also offers various other benefits that make it an indispensable part of a comprehensive financial strategy.

You and your family need reliable life insurance for unforeseen and difficult times. A life insurance policy protects and financially secures the family in times of need. Thus, it would be good to think about buying life insurance at the earliest. Buying a comprehensive cover as early as possible will offer multiple other advantages.

Why Should You Buy Life Insurance?

Life insurance is essential to a comprehensive financial plan, providing security and peace of mind to individuals and their families. Despite its importance, many overlook life insurance due to misconceptions or a lack of understanding. Here are some compelling reasons why you should consider buying life insurance.

Financial Security for Your Loved Ones

The primary purpose of life insurance is to provide financial support to your dependents in the event of your untimely death. This support can help cover living expenses, education costs, mortgage payments, and other financial obligations. Without life insurance, your family might struggle to maintain their standard of living.

Debt Repayment

If you have outstanding debts such as a mortgage, car loan, or credit card balance, life insurance can ensure these debts are paid off, preventing your loved ones from being burdened with financial liabilities. This is especially important if your assets are insufficient to cover these obligations.

Replacement of Income

For families reliant on a single breadwinner, the loss of income due to the death of the earning member can be devastating. Life insurance can replace lost income, ensuring daily expenses and future financial needs are met without significant lifestyle changes.

Peace of Mind

Knowing that your family will be taken care of financially, no matter what happens, provides immense peace of mind. Life insurance helps mitigate the anxiety and uncertainty of life’s unpredictability, allowing you to focus on living your life to the fullest.

Top Reasons to Buy life insurance

Life insurance is a critical financial tool that offers a range of benefits, from providing a safety net for your loved ones to offering significant tax advantages. Here are the top 12 reasons to buy life insurance.

Safety Net for Your Loved Ones

The primary purpose of life insurance is to ensure that your loved ones are financially secure in the event of your untimely death. It provides a lump sum payment that can cover daily living expenses, education costs, and other financial needs, helping your family maintain their standard of living without financial stress.

Dealing with Financial Liabilities

Life insurance can help manage and pay off outstanding debts such as mortgages, car loans, and credit card balances. Covering these liabilities prevents your family from being burdened with debt during a difficult time.

Saving on Income Tax

Life insurance premiums are often tax-deductible under certain sections of the Income Tax Act, such as Section 80C in India. It allows you to reduce your taxable income and save on taxes, making life insurance a smart financial move.

Protecting Your Money

Certain life insurance policies, like whole life, accumulate cash value over time. This cash value can serve as a financial resource you can borrow against or withdraw from in times of need, protecting your money while providing life coverage.

Estate Planning

Life insurance can play a crucial role in estate planning. It ensures that your heirs have the necessary funds to pay estate taxes, legal fees, and other costs associated with transferring your estate, preserving your wealth for future generations.

Business Protection

For business owners, life insurance provides essential coverage to ensure business continuity. It can fund buy-sell agreements, cover the loss of a key employee, and pay off business debts, protecting your business’s financial health.

Peace of Mind

Knowing that your family’s secure financial future provides immense peace of mind. Life insurance alleviates the worry about how your loved ones will manage financially without you, allowing you to live your life confidently and assuredly.

Affordable Coverage

Contrary to popular belief, life insurance can be quite affordable. Term life insurance, in particular, offers high coverage amounts at low premiums, making it accessible to a wide range of people regardless of their financial situation.

Tax Benefits

In addition to saving on income tax, the death benefit from a life insurance policy is generally tax-free for the beneficiaries. It ensures your family receives the full policy amount without worrying about tax liabilities.

Protect Your Insurability

Buying life insurance while you are young and healthy locks in your insurability. As you age or if your health declines, obtaining coverage can become more difficult and expensive. Early purchase secures your ability to be insured at a reasonable cost.

Provide for Your Spouse or Partner

Life insurance can provide financial support for your spouse or partner, ensuring they are cared for financially. This can be particularly important if they depend on your income or if you want to leave a legacy for them.

Customizable

Life insurance policies can be tailored to fit your specific needs and circumstances. You can choose the coverage amount and policy term and add riders or benefits that suit your unique situation, ensuring you have a policy that meets all your requirements.

Significant Benefits of Buying Life Insurance Early·

The adage “the earlier, the better” holds particularly true when it comes to investing in life insurance. Purchasing life insurance early in life offers a myriad of benefits that can have a profound impact on your financial security and peace of mind.

  • Securing a reliable asset for the ongoing uncertain times: The pandemic crashed economies worldwide, including India. The value of stocks has significantly declined, reducing the worth of investments. Life insurance coverage is one of the most reliable assets in such dire times. Since the policy’s life insurance does not bear a saving or investment component, it is protected from market fluctuations. Hence, it can be used to protect long-term goals.
  • Helping the family deal with unforeseen situations: There is no certainty of jobs in the current scenario. Also, the reduction in income has been significant. This, in return, has led to mounting debt, pending bills, and outstanding liabilities. Thus, to ensure your family is well-secured to pay off impending liabilities in case of an unfortunate event, it is best to buy a cover as early as possible.
  • Securing lower premiums when younger: Your age is a major component used to determine life insurance premiums. The higher your age, the higher your policy premiums will be. Insurance companies attach a greater risk to older people, charging them higher premiums. So, to enjoy lower premiums, it is best to consider investing in life cover as soon as possible.
  • Investing for a longer period and allowing the accumulation of a sizeable wealth: Life Insurance is an investment that allows you to stay invested for longer periods. You can generate sufficient wealth if you pay regular premiums and earn interest for a longer tenure. Hence, buying life insurance coverage early in life will help you ensure you allow your funds to grow better.
  • Buying a plan now to maximize tax benefits by exempting the policy premiums: Buying a life insurance cover will offer you two-fold tax advantages. Under Section 80C of The Income Tax Act, 1961, the premium paid will be exempted from tax up to ₹1.5 lakh. The sooner you buy the insurance, the sooner you can claim the tax deductions.
  • As per Section 10 (10D), the death benefit offered upon the insured’s demise is also tax-exempt. Since taxation laws can change at any time, it is best to secure coverage and enjoy the benefits as early as possible.

Key Takeaways

  • Life insurance provides financial security for your family in case of your untimely demise.
  • It helps cover outstanding debts, mortgages, and daily expenses, easing the financial burden on your loved ones.
  • Life insurance protects your family’s future goals and aspirations, such as education and retirement plans.
  • Life insurance can act as income replacement, replacing lost earnings and maintaining your family’s standard of living.

Conclusion

Life insurance is a versatile and essential financial tool that offers many benefits. From providing a safety net for your loved ones and handling financial liabilities to offering tax advantages and peace of mind, the reasons to buy life insurance are compelling and numerous. Whether you are planning for your family’s future, securing your business, or ensuring your estate is handled smoothly, life insurance is a wise investment that can provide long-term financial security and stability.

FAQs on Reasons to Buy Life Insurance

1

Is life insurance only for older people, or should I consider it at a younger age, too?

Life insurance is not just for older people. It is wise to consider purchasing it at a younger age because premiums are generally lower, and you can lock in your insurability while you are healthy.

2

Can I change my life insurance policy after I purchase it?

Yes, many life insurance policies allow you to make changes, such as increasing coverage, adding riders, or converting a term policy to a whole life policy. Check with your insurer for specific options.

3

Can I borrow money against my life insurance policy?

Yes, you can borrow money against the cash value of certain types of life insurance policies, like whole life or universal life insurance. This is not possible with term life insurance.

4

What happens if I develop a health condition after purchasing life insurance?

If you develop a health condition after purchasing life insurance, your existing policy remains in effect and unchanged. Your premiums will not increase, and you will continue to be covered according to the policy terms.

5

I’m young and healthy. Why should I consider purchasing life insurance now?

Purchasing life insurance when you are young and healthy is beneficial because you can secure lower premiums and lock in your insurability, ensuring future coverage even if your health declines.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

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