Life insurance is one of the most important financial products to consider in today's world. More than just money at claim, a well-planned life insurance policy can help secure your family's future while also helping you save taxes. Let's understand the key reasons to consider life insurance in 2024 and beyond.

Why is Having a Life Insurance Important in 2024?

In today's unpredictable times, life insurance provides financial security that your family might need in case of your unfortunate demise. It ensures your loved ones are protected and can continue their lifestyle uninterrupted. With rising medical costs and inflation, the money from a life insurance policy can meet major future expenses like children's education, home loan repayment, marriage funds, etc., and remove financial worries for your dependents. Websites like ACKO simplify comparing options, reading reviews, and purchasing affordable term insurance completely online. Read more: https://www.acko.com/

Tax Benefits of Life Insurance

Life insurance plans provide several tax-saving opportunities. Under Section 80C of the Income Tax Act, an individual could claim a deduction of up to Rs. 1.5 lakh annually for premiums paid towards life insurance plans. It reduces the overall tax outgo. In addition, premiums paid for critical illness, Surgical Care and other similar riders that provide an additional safety net are eligible for tax deduction under Section 80D. Furthermore, in the unfortunate event of the policyholder's demise, the death benefit or maturity sum received by the nominee is tax-exempt as per Section 10(10D).

The Role of Life Insurance in Financial Planning and Security

A life insurance policy is a crucial component of one's financial plan. It is especially important if you are the sole breadwinner of your family or have young children who are financially dependent on you. The money from a policy ensures your family can meet long-term financial goals. It provides both income replacement and savings that can be used judiciously at a later stage for goals like retirement, depending on the type of life insurance policy you opt for.

How to Choose the Right Life Insurance Policy

Here are the key factors to consider when choosing the right life insurance policy:

1. Term of the policy: This refers to the number of years you will pay premiums. Evaluate your needs and opt for a long enough term.
2. Type of policy: The main ones are term insurance, whole life, endowment, money back, and unit-linked insurance plans (ULIPs). Term plans offer higher coverage at lower costs but have no savings component. Other plans combine insurance and savings.
3. Coverage amount: Calculate how much money your family would need to maintain their lifestyle and meet future expenses if you're no longer around. Opt for a sum assured/coverage of at least 10-15 times your annual income.
4. Premium amount and payment term: Insurers offer flexible premium payment options, such as yearly, half-yearly, or monthly payments. Consider your budget when choosing a premium so you can comfortably pay over the chosen term.
5. Additional riders: You can optionally add riders for extra protection, such as critical illness, disability, or accidental death, by paying a small premium.
6. Premium payment period and premium paying options: Depending on your needs and affordability, this could be regular pay, limited pay, or single pay. Limited pay means paying premiums only for 5, 10, or 15 years.
7. Nominee and assignments: Make sure to nominate someone as the beneficiary who will receive the claim amount.

Steps to Purchasing Life Insurance

Here are the steps to purchase a life insurance policy:

Step 1: Decide your coverage amount

The first step is determining how much money your family would need to continue their lifestyle and fulfil long-term goals if something happens to you. To do this accurately, evaluate your family's current and future financial needs and obligations.

Step 2: Shortlist options

Research the different types of life insurance plans, such as term plans, endowment policies, ULIPs, etc., available in the market. Narrow them down to 2-3 options that suit your budget and needs. You can consult a financial advisor or ask friends for suggestions at this stage.

Step 3: Apply online

Nowadays, most insurers provide an easy online application process. Review the details carefully and accurately. Complete the online form with all relevant personal particulars, medical history, and nominee details.

Step 4: Undergo medical tests if required

For high insurance amounts or if suggested by the insurer due to age/health factors, simple medical tests may need to be taken at home or a lab centre. This helps the insurer assess insurability.

Step 5: Receive and review policy documents

Once underwriting is cleared, the life insurance policy document will be issued within a few days. Thoroughly review the terms and conditions.

Step 6: Commence premium payments

Start paying your premiums regularly through the selected mode - yearly, half-yearly or monthly- as best for you. This will keep the policy active.

Step 7: Process claims if needed

In case of any unfortunate event, inform the insurer promptly and submit the required papers to settle the death benefit.

The Bottom Line

Life insurance plans ensure financial security and offer valuable tax benefits. By weighing your needs carefully and opting for the right policy from a trusted insurer like ACKO, you can secure your loved ones’s future.

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