why we need insurance The true meaning of the word life assurance made sense to me when my neighbor Raghu suddenly expired one morning.
Raghu met with a sudden attack and declared dead on arrival at the hospital. His family had no clues on what to try to to during a situation like this. Once his last rites were over the family set and had a glance at his investment file.
I started googling and visiting various websites and located some facts which were hitherto not known to me. For the advantage of the readers, i will be able to explain them one by one.
The concept of life assurance is a few century old or more, but its importance remains not felt universally.
We recoil from a life assurance plan just because we feel that nothing will happen to us and life will continue very easily and comfortably. that’s why if you check out the chart below you’ll find that only 3.30% of India’s population is roofed under a life assurance plan.
Provides financial security
A life assurance policy promises to pay a payment benefit just in case the life assured falls prey to premature death. This promise is extremely important within the case of people who are bread-winners for his or her families. within the unforeseen demise of the bread-winner,
the family can overcome the financial crisis by getting the claim proceeds. Though the emotional loss is irreplaceable, the life assurance provides the much needed loss. Thus, a life assurance policy provides for financial security to the individual buying insurance.
Helps meeting financial goals
The life assurance industry offers an entire gamut of life assurance plans designed to cater to the myriad life goals. So, whether you’re planning for building a toddler education fund, a retirement corpus, or want to guard your home equity credit or personal loans just in case of your untimely demise or just want to make wealth,
there is always a life assurance plan tailor-made to suit these requirements.
While we start working, we must plan for our different financial goals and begin saving for it. life assurance plays an enormous role in financial planning because it ensures the longer term goals are met albeit the only bread earner isn’t around thanks to his sudden demise
Life insurance inculcates the habit of savings
When you plan for your financial goals, you would like to save lots of for it so as to realize it. life assurance inculcates the habit of saving as you would like to pay the annual premium for the varied life assurance plans that you simply have bought for an extended period of your time. life assurance companies even provide you the power of paying the premiums monthly. Therefore, you’ll link the premium payments easily with receipt of your monthly salary.
It saves taxes
The unique advantage of having a life assurance plan is that you simply can avail tax benefits of uptoRs 150,000 per annum under section 80C of the tax Act 1961.
Future incomes and claims also are tax-free– The maturity proceeds received by the policyholder or the claim received by the nominee is tax-free under Section 10 (10D) of The tax Act. Therefore, it’s one among the few saving products which give you tax benefits on your investments and also on receipt of the maturity proceeds.
Now that i do know what the key benefits of taking life assurance are, I wanted to understand what proportion life cover is adequate because it was haunting me that Raghu had a life cover of only Rs5 Lakhs while his monthly income was Rs 1 Lakh? Was the life cover sufficient? allow us to now understand that.
How much life cover is required?
Though life assurance provides invaluable financial security to your loved ones, the sum payable depends on what proportion life risk cover you’ve got taken. I find that there’s no clear-cut answer to the present just because the life risk cover depends on your financial planning and if you’ve got considered all aspects of your asset and liabilities.
How you’ve got received the life risk cover amount is extremely important. for instance – While deciding your life risk cover, you want to take under consideration your annual household expenses, your home and private loan (if any), future goals like child education and retirement etc.
Various techniques are developed which enable one to seek out out the life risk coverage required. Some experts stress the relevance of the Human Life Value technique to spot the life assurance requirement while others devise an easy income-based approach to the present question.
Some financial planners recommend that the life cover should be adequate to an amount which, if invested during a safe instrument, can fetch a daily income for the dependants in order that they’re ready to maintain an equivalent lifestyle which they were wont to when the life assured was alive. That essentially means just in case there are any liabilities, like home equity credit, consumer loan etc. such amounts should be added to the quantity of insurance required.
Therefore, regardless of the technique applied to reach the life risk coverage amount, one thing remains universal which is, a fact-finding exercise is required which highlights the prevailing financial position of the proposer, identifies his future and current life goals while analyzing the asset and liabilities then reach the optimum amount of life risk coverage.
Remember, life assurance should be purchased counting on your need and not on the idea of any trend. you want to plan your Insurance needs supported the quantity while accounting inflation.
If you would like to enjoy life now reap the varied benefits which life assurance has got to offer and protect your family from the financial uncertainties of life in order that they will maintain an equivalent lifestyle just in case something happens to you. Get yourself adequately insured today, if you’re not already. Believe me, you and your family would thank me later.