The concept of life insurance has been around for a long time now since it was first introduced during the 1760s in the United States of America. Over the years, it has evolved significantly, and today it is a popular financial instrument that protects the livelihoods of millions of homes worldwide. Life insurance provides financial cover for the family if the policyholder passes away during the policy period.
If you are a first-time life insurance buyer, here are a few things that you must absolutely know.
If you have dependent family members, you must buy life insurance
If your family members, including spouse, children, parents, siblings, are financially reliant on you, a life insurance policy is a must-have for you. If something happens to you, the policy will cover your family’s financial requirements and help them be financially independent.
There are different types of life insurance policies
As the insurance needs for the people have diversified, the insurance companies have introduced different types of life insurance policies. Some of the most popular types are term insurance, ULIP (Unit Linked Insurance Policy), Permanent Life Insurance, etc.
It is pivotal that you assess your insurance needs and research the different types of life insurance policies before buying. Also, it is vital to read the terms and conditions carefully before you sign the policy documents.
The premium varies based on a variety of factors
When you purchase a life insurance policy, you must pay the premium to the insurer periodically. In return, the insurer will provide you with the life cover and pay the policy benefits to the family if something happens to you.
The premium amount for the life insurance policy depends on various factors like the type of policy you buy, your age, profession, lifestyle habits, health status, riders chosen, sum assured, policy duration, etc.
For example, if a term insurance policy has the lowest premium among all life insurance policies. If you have the habit of smoking, you may have to pay a higher premium than those who don’t smoke. Also, the premiums are generally lower when you buy the policy at a young age.
You can buy riders
Riders are additional coverage options that you can buy to widen the scope of your regular life insurance policy’s scope. You can buy them voluntarily and pay an additional premium for it. The riders are helpful to cover the specific risks your regular does not cover.
Some popular riders that most people purchase are waiver of premium rider, critical illness rider, income benefit rider, accidental death, an accidental disability rider, etc.
You can avail of tax benefits
Apart from offering financial protection to your family against uncertainties, a life insurance policy also allows you to get a tax benefit and reduce your annual tax liability. The premium you pay for the policy is eligible for tax deduction under Section 80C of the Indian Income Tax Act.
Also, the death benefit that your family may receive during claim settlement is fully tax-exempt under Section 10(10D) of the IT Act. If your policy has an investment component and allows partial withdrawal from the corpus, the amount you withdraw is tax-free.
Life insurance is a necessity for all. It gives you peace of mind knowing that your family will not face any financial hassles even when you are not around. Do your research well and purchase a policy of your choice online.