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Is Life Insurance Investment Worthy Enough

It is recommended to compare life insurance investment pros and cons before making your decision. Here is a analysis for you whether life insurance is worthy enough or not.

  • 14,563 Views | Updated on: Feb 26, 2024

Life is uncertain and you never know when and how your circumstances may change in an instant. A sudden illness or an accident may result in severe injuries that prevent you from pursuing your career and earning an income.

To protect yourself and your loved ones from such uncertainty, you may avail of insurance policies. You may choose a life insurance policy that offers a lump sum payout to your beneficiaries in case of an unexpected incident during the policy term. Additionally, you may choose a health insurance plan that provides the benefits in case you are diagnosed with any of the covered illnesses.

Although insurance coverage is important, many people avoid it with the objective of saving the premium amount. To overcome this limitation, insurers offer certain types of investment insurance plans.

Some experts advise that you must not avail of insurance companies with an investment objective. Others may recommend earning some returns on your insurance investment. It is recommended you compare life insurance investment pros and cons before making your decision.

Pros of life insurance

Replace lost income

The primary objective of life insurance is to provide financial security to your family in your absence. In case you are unable to earn a regular income, an insurance plan offers a replacement to ensure your loved ones are able to sustain their lifestyles without facing financial difficulties.

Cover your liabilities

It is most likely that you have multiple debt obligations, such as home loans, car loans, credit card bills, and others. In case of an unfortunate event, you do not want to financially burden your family while they deal with the emotional loss. A life investment insurance plan will help ease the financial burden on your family to meet these various outstanding liabilities.

Tax-deferred growth

The premium you pay on your life insurance policy is eligible for tax deductions under section 80C of the Income Tax Act, 1961. Additionally, the death benefits paid to the beneficiaries in case of an untoward event during the policy term are tax-free. Moreover, if you survive the policy term, the maturity benefits are also tax-exempt under section 10(10D) of the Income Tax Act, 1961.

Meet your financial goals

You may have various goals during different stages of your life. For example, you may want to buy a home, plan for your children’s higher education, and ensure financial independence after retirement. You may use life insurance policies to meet these goals through planned investments in certain types of policies.

Additional benefits

If you require some additional liquidity to meet emergency fund requirements, you may borrow against your life insurance policy. Compared to most other types of loans, borrowing against the insurance plan is more cost-efficient and affordable. However, it is recommended you check with your insurer before you make your decision of borrowing against the policy.

A term insurance plan is the most affordable way to procure higher coverage. However, most term policies do not offer any survival benefits. It is recommended that you invest the money you save through a lower premium on your term plan in other financial instruments, which will help you meet your various life goals.

When you are evaluating life insurance investment pros and cons, you will realize that there are no cons to mention. After all, insurance can only be a good thing. Therefore, it is certainly worth investing in insurance. It is recommended you consider your financial situation and personal requirements before deciding on an investment insurance plan. To maximize the benefits from your life insurance plans, it is important you remain invested for a long period of time. Insurance is not an investment product if you are looking to earn returns in the short-term.

More importantly, do not buy an insurance policy only with an investment perspective. The primary objective of life coverage is to provide financial security to your loved ones in your absence. Therefore, it is recommended you invest adequately in insurance to cover your beneficiaries before you make additional investments in other types of instruments to meet your investment goals.

- 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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