Do you think your life insurance premium is draining all your savings every month? Do you end up regretting in this investment? Have you found some other better investment that this one where a lump sum amount gets deducted as soon as your salary gets credited? To answer those let us delve deep into the Life Insurance functionalities.
What is life insurance?
A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It’s important to note that death benefits from all types of life insurance are generally income tax-free.
Why do you think it’s taking a toll?
Life insurance means that you have to contribute your premium until you die or a fixed tenure that is very long. This will be expensive for the insured. The part of the life insurance premium paid towards risk coverage is an expense. Hence to a few, since the return is not immediate, it may seem to be a lifelong unnecessary expense. This is purely due to psychological reason.
Some insurers will use dirty tricks to evade the pay the sum insured even after maturity of the policy. For this reason, it is important that you read all the clauses of the life policy at the time of entering into the contract. Further, you can consult your financial advisor before buying a policy. Such cases may make you feel that your monthly or yearly premium is a waste and of no monetary benefit.
Buying expensive policies and investment after a plan which is of use may also make you feel broke every now and then.
Any other way to dissolve such negativity
Life Insurance makes sure that your dependents can lead a decent life economically despite your death. A number of countries allow you to offset the premiums that you pay for your life insurance in your taxable income. Also, the maturity amount that you get is also not taxable in a number of places. The risk factor involved is also less compared to other investments in the market.
Life insurance has a range of policies to choose from. In some policies, one is compensated when a certain period of time elapses. Thus, it is advisable to assess the plan and take financial advice from reputed advisors before starting with the first mostly installment. If the above plans are in place, one can never feel that life insurance premium is burning a big fat hole in their pocket, rather they would agree in the long-term benefits.
Buying Life Insurance is not Rocket Science. However, this trillion-dollar industry has made it complicated. There are hundreds of types of insurance and products which make choosing a difficult thing for a person. But keeping it simple, like buying term insurance for your insurance, needs and other financial assets for your investment will keep it simple.