Life insurance is one of the major pillars of financial planning. In fact, it is the one of the simplest and best ways to financially safeguard the future of your loved ones in your absence. However, many people are still unaware of the benefits that life insurance can provide. For some people, a life insurance policy can even act as a financial cushion during retirement.
Here are several additional benefits and advantages of life insurance:
- It acts as a lost income replacement. Life provides peace of mind by covering final expenses like mortgage, and other outstanding debts or planned expenses that would otherwise not be paid due to the loss of a breadwinner.
- It can be extremely affordable. Buying a life insurance when you’re young and healthy can save a lot of money. There are online insurance premium calculators that can help you find the policy with the lowest premium by comparing various plans online so that you can easily find the most cost-effective plan according to your own choice and affordability, based upon factors such as the applicants age, health history, and desired amount insured.
- In some places, it offers a tax benefit. It’s true; with permanent life insurance policies, the gain in the cash value is not taxed until it is withdrawn. Depending on which country you live in, life insurance plans can provide even bigger tax benefits too. For example, in India, under section 80C of the Income Tax Act, 1961, one can save up to 150,000 rupees annually. Moreover, the maturity proceeds and claim received under life insurance policy are also tax-free under section 10(10D).
Just remember, if you decide to cancel your policy, it’s very important to keep your options open. If you are thinking about canceling your life insurance policy, or decide that you simply no longer need it, it’s important to proceed proceed with caution. For example, if you’ve overpaid for a policy or have one that no longer meets your needs, don’t cancel the policy until you’ve found a more suitable one — or let the existing policy lapse automatically.
The Bottom Line
Most often we avoid talking about life insurance because nobody likes talking about taboo subjects such as our own death. However, it’s important to have an honest and open discussion about such matters, and part of that discussion includes the potential risks of not having life insurance for the primary family breadwinner — or breadwinners, as the case may be. The truth of the matter is that a life insurance plan should be an essential component of everybody’s comprehensive and long-term financial planning.
Photo Credit: David Hilowitz