Among the many things we know about life, its unpredictability is decidedly one of the most important quality one must never forget. While one moment you may be the happiest you can every dream to be, the very next moment can bring unimaginable sadness as well. One can never know or predict what happens next. And this unpredictability is the very reason why life insurance has even been invented.
While it may seem like a rather depressing thing to do, but seldom do people give a thought about when they may no longer be around. What happens to their family? Who will support the family’s expenses? Who will pay for the children’s education or upbringing? Who will take care of household expenses? This is only the tip of the iceberg when it comes to securing your family’s future, and especially important for individuals who are the sole income earners in their immediate household and support dependents like a spouse, children, or aged parents. In the unfortunate event of death of a family’s income earner, not only is there intense emotional grief to deal with, due to the loss of a loved one, but also impending financial turmoil, following the loss of income.
While it may not drive away the emotional grief, but life insurance can, to a large extent, help the aggrieved family take care of their financial needs at such a testing time. With a life insurance policy, you can secure not only your family’s future, but also help safeguard your business during difficult times. Here are some reasons which highlight the importance of life insurance.
Importance of Life Insurance
To pay off debts
Most people, during their early professional life, end up taking loans to fulfil various needs like purchasing a house, or a car. Some end up taking a personal loan to finance their child’s wedding, or even repay multiple debts. However, in case you happen to pass away suddenly, the burden of all these loans and debts falls directly on your dependent family members. Even if your spouse is employed, the financial burden of paying off these loans falls directly on them. With a life insurance policy, this is one worry less to be worried about as the sum assured from the life insurance policy can help the family take care of such liabilities, without compromising their needs.
To take care of your family’s needs
The primary purpose of life insurance is helping your loved ones take care of their needs, especially at a time when you may no longer be around to provide for them. A dependent spouse, children, or aged parents will continue to be dependent on your income, and leftover savings even after your demise. However, with the loss of regular income, it can be difficult to take care of all expenses, and families often have to compromise on their lifestyle to ensure that essential needs can be taken care of. That’s where life insurance steps in, to help the family take care of their needs like children’s education, as income replacement, to create further savings or investments, and to provide much needed financial stability to the family members.
Insurance for your business
The purpose of life insurance is not just to safeguard the financial future of your loved ones, but also your business concerns. There are life insurance policies specially designed for business owners where the surviving business partner to acquire their deceased partner’s share of the enterprise, while the benefit sum assured pay-out is provided to the deceased’s nominee.
To take care of short & long-term future requirements
Depending on the policy you have chosen, and the payout option, the right life insurance policy can be crucial in helping your loved ones take care of their short term, and long term needs. Short term needs may include immediate expenses such as loans, or liabilities, which need to be repaid quickly. Over the longer term, the family would require funds to take care of the children’s education, to invest, or save for the future, to take care of recurring household expenses, etc. Certain insurance policies also come with built-in investment components which allow for investments in a variety of funds, as chosen by the policyholder. Some policies also have combination payouts where a part of the sum assured is provided immediately after death, as lump sum. The remainder is provided over a specified future period in fixed instalments and acts as income replacement.
For mental peace
Having mental peace is very important to leading a worry free life. With life insurance, that is exactly what you get. You no longer have to worry about what happens to your family’s financial well-being if you are not around. Given that tragedy can strike at any time, having a life insurance policy will at least give you peace of mind that your loved ones are provided for.
To save on tax
Besides providing protection, the other major reason people buy insurance is to save on tax. As per the current provisions of Section 80C of the Income Tax Act, 1961, policyholders can avail tax benefits of up to Rs.1.5 lakh on life insurance premiums. Also, the proceeds received under the death/maturity benefit are also tax free under Section 10 (D) of the Income Tax Act, 1961.
These are just some of the many reasons that make life insurance an absolute necessity, especially for someone who is the sole earning member in their household. If your family’s future is dear to you, then you must not delay purchasing a life insurance policy, after due consideration of your needs.