When you think about the financial security of your loved ones, life insurance is bound to come to mind. It is a simple financial instrument that allows you to secure the financial health of your loved ones in your absence. While, along with the death benefit, life insurance has a lot more to offer. There are several types of life insurance that fit different individuals’ needs.
Here are some things apart from the death benefit that you may not know about life insurance:
Payout post maturity
Most people assume that life insurance gives no returns after surviving the policy term. This assumption compels many young people to avoid buying life insurance. Whereas, there are several types of life insurance that have an investment quotient to them as well. In these policies, you get a sum assured after the maturity of your policy. They are a combination of insurance and investment and are usually the go-to choice for young adults. Also, there are policies where you can opt for a waiver of premiums if you have never made a claim throughout the duration of your policy. However, most people are unaware of these benefits of life insurance and let go of all the money they paid as premiums.
Lends funds when in need
There are several life insurance policies where a policyholder may receive funds while being alive. It is one of the biggest myths of life insurance that only after the demise of the policyholder one can claim for the sum covered. In reality, when you buy life insurance, you can add critical illness, accidental death, and disability riders. If the policyholder has selected a critical illness rider and suffers from a stroke or cancer, the medical expenses and diagnosis for the condition will be covered too.
Collateral to get a loan
There are several types of life insurance, which can be used as collateral to secure a loan. You can keep the plans that offer maturity benefits as collateral and secure loans against them. Banks allow this, as they can then claim the maturity amount if you cannot pay the loan. It works similar to how people mortgage their gold or land. Hence, when you buy life insurance, keep in mind that the ones with maturity benefits can help you in times of need.
Provides a pension plan
Your life insurance can play a key role in your retirement too if you treat it as a pension plan. There are insurance plans that are retirement-oriented. You get returns after the maturity of the plan in such types of insurance. ULIPs, endowment plans, pension plans are some common types of life insurance with returns. Also, one of the biggest benefits of life insurance is that the sum received from these plans post your retirement is exempt from taxes.
Tax benefits
Before buying life insurance, it is always good to use a life insurance premium calculator to get an estimate of the premiums and sum covered. The premiums that they pay for your life insurance policies are exempt from taxes under section 80C of the Income Tax Act. Along with that, the death benefits, as well as the maturity benefits, are exempt from taxes too. This feature of tax benefits helps in building a good cash value over a period and can be used in your time of need.
Premium waivers
Several insurance companies offer the option to waive the premiums of the additional riders when you purchase multiple policies. These provisions allow people with disabilities to keep their insurance coverage without having to pay for it. An individual qualifies for a waiver of premium when the policyholder is qualified for an illness or injury. The premiums waiver is one benefit of life insurance that is rarely used, but it is always good to have.
Life insurance has more benefits than securing the finances of your loved ones in your absence. When you choose life insurance, ensure that you choose the one that is well-aligned with your long-term goals. There are several myths and assumptions related to what exactly is life insurance. Above were some factors of life insurance that most people are unaware of.
