Advantages and Disadvantages of Life Insurance Policy
India is one of the countries with the highest population yet stands at the bottom in terms of insurance penetration. Many people in India think of insurance as an expense and tend to ignore the basic fact that insurance is to be considered an investment. We think of insurance only at the time of mishaps or accidents as we have to pay the bill from our pocket.
One of the best ways to overcome the uncertainties in life and ensure that you and your loved ones are protected financially at the time of adversity is to invest in good life insurance. Apart from providing protection and financial security to your loved ones, there are many other benefits of life insurance policy, which are discussed below:
Benefits of Life Insurance
Life insurance provides life cover that protects you and your family in case of an unexpected event happens. Some of the benefits of life insurance in India are
- Financial Protection: A life insurance policy helps to minimize the risk of financial difficulties which would be faced by the families in case of the sudden death of the policyholder.
- Long Term Savings: Some life insurance plans offer you the opportunity to create wealth. If one wants to make long-term investments, it’s important to think about life insurance meaning. Such insurance plans help you make systematic savings and create wealth that can be used for your future goals.
- Tax Savings: Life insurance offers tax dual benefits under prevailing laws as per Income Tax Act, 1961. You can avail of a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. The maturity insurance plans may be completely tax-free. This tax benefit is under Section 10(10D) of the Income Tax Act.
- Save Money: The premium paid by the customer is depending on age, life expectancy, and health, and gender. Life insurance gives you the ability to stick at low premium rates while you’re young compared to an older age.
- Achieve Goals: Life insurance helps you achieve your long-term goals such as buying a home or planning your retirement, child education, traveling abroad, etc.
- Get Peace of Mind: Death is unavoidable. In the case of your absence, your family may face financial difficulties so the least you can do for your family is to secure their financial future with a life insurance policy.
Advantages of Life Insurance
The following are the main life insurance advantages:
- Return on Investment: Advantages of life insurance as an investment. Whenever you visit a financial advisor for financial planning you can see that most of them suggest you go for life insurance. They encourage you to invest in life insurance so that you and your loved ones are not only protected but also a considerable amount of returns can be obtained from the policy. Many life insurance schemes in India provide decent returns as well as bonuses that no other investment tools offer. Life insurance is considered one of the safest tools for investment as the money invested is returned to you or your family at the time of maturity or as a death benefit.
- Death Benefit: In case of any unexpected event to you, which results in the loss of income to the family, the insurance company provides compensation in the form of the death benefit to the family. The nominee of the insured receives the death benefit as well as the accrued bonus if any, depending on the type of the policy. The death benefit can be claimed as a lump sum or monthly benefit, in which the monthly benefit option can be a boon for the family having old age people or disabled people.
- Financial Security: This is the main advantage of life insurance. The main purpose of life insurance is financial protection. If the sudden demise of the insured can put the family in jeopardy. With no regular income, the family may soon face a financial crisis. Having a life insurance policy helps your family come out from any financial crisis after your sudden demise.
- Income tax exemption: The premiums paid under the life insurance policy are eligible for income tax exemption under section 80C. At present under this section of income tax, you can avail of a maximum tax deduction of Rs.1.5Lakh.
- Additional Coverage: Additional coverage is also called riders. The riders allow you to increase the coverage and get comprehensive coverage. Riders may include coverage against personal accident, waiver of premium payments, critical illness, loss of income due to a disability, etc.
- Loan availability: In the event of any emergency such as a college fee or property purchase, the loan can be availed against your life insurance policy. These days almost all insurance companies are providing this option. When you apply for a loan a certain amount of your sum assured is provided as the loan amount.
- Retirement Income: Life insurance policies can also be taken for the purpose of regular income after retirement. These policies are called annuity policies and are available with every life insurance company. If you take an annuity policy and pay a premium till your retirement age, then after your retirement monthly income is paid to you by the insurance company.
Disadvantages of Life Insurance
The following are the main life insurance disadvantages:
- High premium for aged people: This is the major disadvantage of life insurance policy. The higher the age the higher would the premium to be paid in the life insurance. This is due to the simple fact that the risk increases with the age so is the premium. So, it is advisable to take life insurance at a very early age to prevent yourself from paying high premiums. There is a chance where the insurance companies have rejected or denied providing policy to old age people having ailments.
- Difficult to calculate the returns: The returns on the life insurance policies are quite complicated and it is highly difficult to predict the returns. The returns from life insurance are purely based on market conditions and performance. So a particular figure is difficult to arrive at in the case of life insurance unlike PPF and other fixed deposit schemes.
- Complex Policies: In India, many insurance companies offer different types of life insurance plans. You can choose the best life insurance plan as per your requirement. But it can also create confusion in the minds of the customer because different insurance policies have different features. Some policies are simple, and some are not so simple. It can be daunting to choose the right life insurance policy.
- Insurance Companies May Not Pay the Benefits: The insurance companies use various tricks to avoid paying the benefits even after the maturity of the policy and also they have denied paying the sum assured or the death benefit to the policyholder or the nominee. They would mention many hidden charges or clauses to reduce the pay-out. So, it is important to carefully understand the details of the policy and choose a company that has a positive pay-out rate. Things to know about the merits and demerits of life insurance and the importance of having life insurance it is advisable to talk to our agents before entering a contract.
- Awareness of Exclusions, Hidden clauses: Any financial product available in the market certainly has some exclusions and hidden clauses incorporated into it. It is your responsibility to find out those clauses and choose the right life insurance policy. For example, most of the policies don’t pay for suicide in the first year and almost all the policies exclude loss of life due to drugs overdose or involvement in criminal activities.
Why Life Insurance Is Important in India?
Human life is subject to risks of death and disability due to natural and accidental causes. A life insurance policy helps to minimize the risk of financial difficulties which would be faced by the families in case of the sudden death of the policyholder. Life insurance is one of the most important financial planning tools available in the market. It is necessary of having life insurance in these hard times of covid-19; the pandemic has bought many uncertainties in the life of the common person. So, there is anything that is needed badly in this situation, it is none other than life insurance.
How to Buy/Renew Life Insurance Policy Online
The process of buying a life insurance policy online has become simple with PolicyBachat. For buying a life insurance plan online please visit Life Insurance Page and follow the below steps.
- Step1: Enter the details such as Gender, Annual income from all the sources, Alcohol consumption and tobacco consumption, Salaries or Self-employed, and Date of Birth. After this, you need to enter your contact details to facilitate a call from our agent.
- Step2: Now the premium from different insurance companies will be displayed on the screen. You can edit the details such as Coverage, Term, Premium payment method, Mode of claim settlement, etc., and submit the details to get the desired premium. The premium can be changed by changing other factors such as Coverage required, mode of payment, etc.
- Step3: The next step is to select the best life insurance plan and pay the premium to the insurance company before proceeding to fill the proposal form details.
Life Insurance Advantages and Disadvantages can be found in our portal. Compare quotes to get the best online life insurance visit Our Portal to avail yourself of a wide range of term insurance quotes calculated using a life or term insurance calculator.