Today’s rapidly changing economic environment demands people to secure their financial stability more than ever. Since healthcare costs, inflation and economic instability are rising, you must make financial plans to protect your family from unexpected expenses. Read on to learn everything you need to know and buy best life insurance plan to ensure long-term security in an evolving economy.
Why Should You Buy Term Insurance?
Life insurance serves its main function by offering financial protection to your family members in your absence. However, it’s essential to understand that there are different types of life insurance in the market. Term insurance plans, whole life insurance plans, endowment plans, and ULIPs are some of the common types.
If you are the sole earner who supports your family through your salary, your unexpected demise can lead to financial instability for your loved ones. With a term insurance plan in place, your loved ones will receive the sum assured in your absence within the coverage term. The payout can enable them to fulfil financial responsibilities such as debt repayment, household costs, educational expenses for children, and more.
Moreover, term insurance is one of the most affordable types of life insurance for long-term protection. Besides being cost-effective, term insurance policies are easy to manage due to their simplicity and clear terms and conditions.
Long-Term Financial Planning with Permanent Life Insurance
People purchase permanent life insurance plans to achieve long-term financial security. Endowment policies and Unit-linked Insurance Plans (ULIPs) unite insurance coverage with financial investment options to help users build asset value over time. Such policies combine financial security benefits and money-saving capabilities, making them excellent tools for planned long-term objectives.
ULIPs allow you to invest in mutual funds, stocks, and bonds. You can achieve results better than standard savings account returns. However, it is critical to know that ULIPs are market-linked, meaning their returns depend on the performance of the underlying assets.
The Role of Life Insurance in Tax Planning
Life insurance plans provide tax benefits up to ₹1.5 lakh yearly under Section 80C of the Income Tax Act. Life insurance is an effective tax reduction method, allowing you to reduce your taxable income.
In addition, the Income Tax Act provides an exemption under Section 10(10D) for life insurance, death, and maturity benefits if specified conditions apply. Life insurance helps you achieve dual objectives of financial protection while achieving tax savings.
Common Pitfalls to Avoid
Selecting the finest term life insurance plan calls for careful preparation and comparison of several policies.
- Procrastination: Delays from procrastinating could lead to higher premiums.
- Underinsurance: This means insufficient coverage, which can leave beneficiaries financially unprotected in case of an unforeseen event. This can result in a shortfall when they need funds the most.
- Ignoring Policy Details: Ignoring policy details can cause unexpected issues, such as denied claims or hidden exclusions, which can lead to financial and legal complications later.
Conclusion
Among the crucial financial steps, selecting the right life insurance policy is essential for achieving financial stability. Based on your current needs and future financial goals, you can choose between term insurance plans, whole life insurance plans, endowment policies, ULIPs, and more.
Remember, term insurance plans give you comprehensive coverage through low premiums. With a term plan in place, your beneficiaries will receive a payout (death benefit) if you pass away during the specified policy duration. The amount can help cover various expenses to sustain their current way of life while handling financial obligations, including mortgage payments, education costs for children, and daily bills.
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