Get a life insurance policy for better security and backup for uncertainties. This is a phrase that you would have come across quite often. It could either be a good friend, relative or an advertisement of some form. Though there is a lot of trust in it, one doesn’t necessarily need to buy insurance due to aggressive sales pitches. But one does need to buy a life insurance for the following reasons.
Why Choose Life Insurance Plans?
There are a plethora of insurance products in the market today and each one of them has a motive and a reason for its existence. In general, buying an insurance plan has a lot of benefits associated along with it. For starters, a life insurance plan could help you pay for your children’s education in the future. Given the constant rise in educational expenses, that is a grey area that one must not ignore.
You can also use a life insurance policy to pay off any debts that you have. If you plan it well, you can receive the maturity benefits of an insurance plan right on time to pay off larger expense such as dissolving home loans or any other smaller debts.
One of the most common reasons for buying a life insurance plan is to provide financial stability to your family members in your absence. No matter how difficult the things might get, the remaining family must continue with their lives. A good insurance plan will ensure that they are not bugged by financial constraints.
A life insurance plan can also be quite industrious for achieving long term goals. Goals such as planning to buy a house or something more fundamental such as retirement plan. With the help of a good insurance plan, you will be able to achieve these goals earlier than expected.
Benefits of Life Insurance Policy
Unlike some other investment options, life insurance policies almost always provide you with certainty. Even before you sign the policy documents, your financial advisor or agent will let you know the sum assured for the premium amount you are willing to pay. It also brings in certainty aspect in the unfortunate event of the death of the policy holder as well.
Buying a life insurance policy is also effective when it comes to tax planning. Most of the proceeds of a life insurance policy are tax free under Section 10(10D). You also stand to benefit from tax exemption under Section 80C for all the premiums that you pay, subject to a maximum of Rs.1.5 lacs for a financial year.
Insurance products also offer a great deal of liquidity when it comes to your money. Most of the insurance policies offer liquidity once the lock-in period is over. This ensures that you are well covered in the case of an emergency.
Since there is a wide range of products available at your disposal, you can pick one that meets your needs. If you wish to go for higher returns you can opt for policies with higher exposure to equity. On the other hand, should you wish to have a conservative approach, debt market is ideal. You can pick and choose a plan according to your goals.
Avoid Aggressive Sales Pitches
It is neither hidden nor a rocket science to understand that sales representatives or agents get commissions for selling insurance policies. Thus, they leave no stone unturned for selling products to consumers. Here are some of the most common sales pitches that are in use.
- You do not have to pay premiums post 5 years for a ULIP plan.
Though theoretically there is nothing wrong with a minimum 5 year period. But it does rob you from enjoying the benefits of staying invested for a longer period of time.
- Invest in ULIP instead of ELSS.
Sales person pitch ULIPs as the perfect combination of life insurance and mutual fund like benefits. However, it is very important to understand that even though ULIP resembles mutual funds in several ways, it is a short term product. If you are looking for insurance, a term of 5 odd years might not give you a good coverage.