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Features
Ref. No. KLI/22-23/E-BB/492
Life insurance is essential for individuals and their families as it protects them and provides financial security in case of unexpected events.
While growing up most of us have heard their family’s discussing about life insurance. Why life insurance is important, why do I need life insurance, and the purpose of life insurance? Let’s discuss how life insurance can benefit you and your family.
Everyone knows that life is unpredictable. Life insurance is a tool that safeguards your family’s financial well-being against unforeseen events. It provides financial security by offering a lump sum amount to beneficiaries in the event of the policyholder’s death. Obtaining life insurance can assist with future planning and provide peace of mind knowing that your loved ones will be financially supported.
Risks and uncertainties are an unavoidable part of life. When these uncertainties strike, they can leave individuals and their families in trouble, increasing the need of life insurance. Life insurance acts as a saviour in these times by managing financial risks. It secures the family in case of an unfortunate event like death and facilitates estate planning, supports education, and helps cover debts and obligations.
Life insurance is a critical component of financial planning and risk management. Its importance and need can be understood through several key aspects that are mentioned below:
Life insurance provides financial support to dependents and beneficiaries in the event of an individual’s death by covering living expenses such as housing, utilities, and daily necessities and providing for their families.
Insurance plans assist in settling outstanding debts and financial obligations following an individual’s death. Life insurance can cover mortgages, car loans, credit card debt, and other liabilities, preventing an individual’s family from becoming indebted.
Life insurance ensures funds are available for children’s education by providing financial security for educational expenses. Thus, children can pursue higher education without being financially stressed.
In case of an unfortunate event like an individual’s death, life insurance acts as an income replacement tool. If an individual is the primary breadwinner, it can provide a death benefit that replaces the income earned. Dependents can rely on the proceeds of life insurance to provide for them, thereby ensuring the financial stability of the individual’s family.
Having life insurance gives an individual the peace of mind of knowing that their family is financially protected, alleviating stress. Financial coverage offered by insurance plans can help you relax during emergencies.
Life insurance is more than just a financial tool; it’s also a critical component of business risk management. It ensures business continuity by providing debt protection, estate liquidity, funding buy-sell agreements, and a payout to the company to offset the financial impact of losing a key employee or executive.
An individual can claim a deduction of ₹1.5 lakhs under section 80C and for certain tax-exempt proceeds on death or maturity under Section 10(10D) of the Income Tax Act, 1961 under life insurance.
Life insurance plans provide add-on rider options, such as riders for critical illness, disability, etc., and coverage for a wide range of health expenses. An individual can customize and enhance the plan’s importance.
Life insurance can be a great resource in estate planning, providing funds to cover estate taxes and other costs. This ensures that one’s estate is settled efficiently without forcing heirs to liquidate assets or face financial hardship due to taxes and fees.
Life insurance plans help individuals protect their families after retirement by providing survival and maturity benefits. The payouts from a retirement and pension plan can assist them in building a financial corpus for retirement, allowing them to live comfortably after retirement.
Multiple insurance options are available in the market; selecting the right insurance policy can be an overwhelming task for an individual. As a result, it is critical to research and compare insurance policies, including their benefits, exclusions, and inclusions, before purchasing.
Following these steps can help the individual make an informed decision.
When purchasing life insurance, individuals should consider their dependents, debts, and future financial needs. For health insurance, they should consider their current health conditions, frequency of doctor visits, prescription needs, and any specific health concerns. Apart from these, it is also necessary to set financial goals, such as long-term or short-term.
After evaluating needs and requirements, the individual must determine which type of insurance plan is required. Numerous types of insurance policies are available in the market, including life insurance policies such as ULIPs, term plans, endowment plans, and others, as well as health insurance plans such as Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and so on. Every insurance policy has its pros and cons.
The claim settlement ratio represents the insurance company’s success rate in effectively settling claims. A higher claim settlement ratio indicates a better success rate, while a lower ratio indicates the opposite. Individuals should always choose insurance companies with a high CSR.
Life insurance ensures financial security and peace of mind for one’s family. It protects them by replacing lost income, covering debts, and addressing future expenses such as education and estate taxes. Without life insurance, one’s family may face financial hardship and struggle with debt. By securing life insurance, one safeguards their family’s financial well-being, allowing them to maintain their standard of living and achieve long-term goals even in their absence.
1
Life insurance is important for financial security because it protects an individual’s family in the event of an unfortunate death.
2
Life insurance can help people pay off their mortgages, car loans, credit card debt, and other liabilities. Preventing their family from liquidating assets to pay debts.
3
Yes, life insurance can support your child’s education in your absence, ensuring they have the opportunity to fulfill their dreams without financial obstacles.
4
Life insurance can help your family replace lost income by providing financial safety in the event of your death. The beneficiaries can choose whether to receive the death benefit as a lump sum or in monthly payments.
5
Life insurance provides peace of mind to policyholders by providing financial security to their families in case of their death.
6
Life insurance contributes to business continuity by funding buy-sell agreements, covering debts, or providing capital for business succession.
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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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