Life Insurance Basics
Life insurance offers you following benefits –
- Life Cover
- Long-term Savings
- Life Stage Specific Planning
- Tax saving
Things to know before buying Life Insurance:
- Should life insurance be a part of my financial plan?
- Should I buy life insurance only to cover financial risk?
- What is the amount of Life Cover I should opt for so that my family’s future is secure in my absence?
- Are there other aspects I should consider while looking at a life insurance policy?
- How can I be sure that the life insurance policy being offered is the right choice for me?
Advantages of Life Insurance
This is the most important and primary benefit of any life insurance policy. The Life Cover is the amount that your insurance company pays to your nominee* in case of an unfortunate event during the policy term. This amount ensures that your loved ones’ future is secure, even in your absence.
*Nominee is the person you appoint at the time of purchase to receive the benefits of your insurance policy in your absence.
You must select the right amount of Life Cover in order to make sure that it is sufficient to take care of your family’s well-being. A good thumb rule is to choose a Life Cover which is at least 10 times your annual income. For example, if your annual income is `15 lakh then your Life Cover should be at least `1.5 crore. Similarly, if your annual income is `2 lakh per year, then your Life Cover should be at least `20 lakh.
To select the right amount of Life Cover, you also need to keep the following questions in mind:
- How much money will my spouse or parents need to manage daily expenses?
- If my family and I had planned to buy a house or a new car, then how much money will they require in my absence?
- How much money will my children require to complete their education?
- How much liability do I already have from which my family needs to be protected?
There could be other similar questions that are personally relevant to you for deciding the right amount of Life Cover you need.
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Life Insurance is also a good way to systematically save and build wealth for the future. It is an ideal long-term savings tool that can help you meet your financial needs after retirement or even fulfil a future goal like your child’s marriage. Thus, with life insurance, you get double benefits of Protection as well as Savings.
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Life Stage Specific Planning:
Life insurance is an option that offers products tailor-made for various life stages. At every stage of life, you and your family have certain goals that you need to plan for. These goals can be buying a new house, planning for the education or marriage of your children, creating wealth for your retirement, and much more.
Here are some common needs that you may have in different life stages:
|Life Stage||Primary Need|
|Newly Started Earning||Taking care of your ageing parents and long-term wealth creation|
|Just Married||Securing your spouse’s future, long-term savings and taking care of liabilities (such as loans)|
|Just Became a Parent||Children's education, protection and increasing your wealth|
|Parent with Teenage Children||Planning for retirement and increasing medical costs|
|Golden Years||Regular income, health and medical costs, security for your spouse|
Under the Income Tax Act, 1961, you can save tax on your hard earned money by using our innovative Life Insurance products and solutions. You can get tax advantage at different stages of your life insurance policy.
- Stage 1: Entry Advantage – You receive tax benefits* on your premium payments, under Section 80C, 80CCC and Section 80D.
- Stage 2: Earnings Advantage – The growth on your money is not taxable*
- Stage 3: Exclusive Switching Advantage – You can make completely tax-free* debt-equity Switches**
- Stage 4: Exit Advantage – You also receive a tax free* Maturity Benefit#
*Tax benefits are subject to conditions u/s 80C, 80CCC, 80D, 10(10A) and 10(10D) of the Income Tax Act, 1961. Tax laws are subject to amendments from time to time.
**Switch is an option to move your allocated money between equity and debt funds
#Maturity Benefit is the amount you receive when your policy ends
Make sure that you always check that the policy documents to know the tax benefits offered before buying.