One of the main responsibilities of the breadwinner of the family is to secure the family’s financial future to ensure his/her family is well-provided for, especially at a time when he/she is not around.
While you may not be able to support the family forever, but you can surely plan to help and financially protect them with the purchase of life insurance. The main purpose of the life insurance isn’t meant for oneself, rather, it is specifically designed to take care of your loved ones when you are not around, or you’ve passed away. Life insurance is an important financial instrument to help make sure that the family members (whether it be a spouse, partner, children, aging parents, loved one, etc.) are financially taken care of upon your death.
Investing in life insurance can bring tax savings and supports you financially in the time of need. A few examples how life insurance protects your family are as follows:
Financial Security – Death or Maturity Benefits
- Provide peace of mind that your family will have some financial protection upon your passing
- Allow loved ones to maintain their current standard of living without worrying about the lost income
- Pay for additional or existing childcare needs
- Pay for school, college and higher studies fee and process
- Pay off the mortgage
- Life insurance can help pay for things like the burial and funeral service, among other things
- If suffering from a critical health-related issue that requires substantial amount of medical bills, life insurance could help them pay off
- Death benefit, paid to the beneficiary of your choice from your life cover policy, helps with things like mortgage payments, care of loved ones and basic needs like food and childcare
- Premiums paid towards life insurance are tax deductible under the Section 80C of the Income Tax Act of 1961; with a deduction of up to INR 1.5 lakhs from your income tax by making smart investments in tax saving life insurance
- Riders are specific covers that you can add to your basic insurance policy; for instance, you can add an accidental death cover, partial or total disability cover or a critical illness cover.
- With a nominal increase in premiums, these add-ons prove to be of great help during times of crisis.
- Riders also provide tax benefits; premiums paid for health-related riders are eligible for deductions under the Section 80D, while accident and income benefit riders qualify for deductions under the Section 80C of the Income Tax Act
- Term plans are the most basic form of Life Insurance to secure the family’s finances
- Term insurance provides pure risk cover, which explains the lower premiums
- A fixed sum of money (the sum assured) is paid to the beneficiaries if the policyholder expires over the policy term (however, if the policyholder survives, there is no pay out)
- Flexibility to enhance the life cover during critical stages of the policyholder’s life (For instance, an insurance company may allow policyholders to enhance the life cover by 50% at the time of marriage and by 25% at the time of turning a parent)
- Individual can add various riders to the term plan, in addition to the death benefit of an equal amount should he die over the term of the policy (riders include critical illness, disability cover, loss of employment cover, etc.
Child Education Plan
- In the absence of the breadwinner, the plan takes care of the child’s education need or higher studies without putting undue pressure on the family’s finances. Most important feature of Child education plan is, in case of death of proposer, the premium stops but benefits of the policy are continued and given to children after maturity*
- In the absence of the breadwinner, it will be the responsibility of the dependents to pay the remaining loan amount; which could put a lot of burden on the family’s finances especially if it is long-term in nature like home loan for instance
- Loan cover can protect the family from the liability as the insurance cover can settle pending EMIs (equated monthly instalments)
Life Insurance can financially protect the ones you love by helping you plan accordingly and think about all costs for the present, near future, and distant future. So, whether you are the primary breadwinner or not, investing in a good life insurance cover can bring you both mental peace and financial benefits.
*Customer needs to ensure the policy has the waiver of premium rider is part of the plan.