When a person is the primary earner of a family, they are constantly thinking of ways to secure their family’s present and future. They save their income as much as they can, along with diversifying their portfolios. Among the several money decisions that they make, choosing their life insurance is one of the most important ones.
Life insurance is a contract between an individual and an insurance company. The insurance company agrees to provide a sum assured to the nominee of the policyholder in case of his demise. In exchange for the sum assured, the policyholder is required to pay recurring premiums. It is a simple financial tool that most people opt for to ensure that they protect the future of their loved ones in their absence.
While ensuring the monetary stability of loved ones is the primary motive of term insurance, there are several other uses of term insurance as well. Many individuals also used it as collateral to secure loans. While many use the funds received post maturity for their retirement or any financial urgencies. Apart from these obvious benefits of life insurance plans, here are some creative ways you can use your policy:
Monetary care of family members
When you are earning and taking care of your loved ones, be rest assured that in your presence, they are living their best lives. However, you always need to think about the future. Have you wondered how they will afford their lifestyle and expenses in your absence? You need to ensure that your financial portfolio is enough and they can meet their needs sufficiently. This is exactly where life insurance proves to be of great help. In case of a time when you are no more, the sum cover of your life insurance plays the role of a backup income. When you are buying life insurance, use tools like life insurance premium calculators to ensure that your coverage is enough for your family’s needs. Do take into consideration inflations while estimating the expenses of your loved ones.
Use your policy as an inheritance
When you are the breadwinner of your family, you want to ensure that you have left a significant wealth behind for them. You also want to ensure that the money you have kept for them does not have any tax burden attached. A life insurance policy allows you to do both with ease. When you purchase a life insurance policy, the nominee of your policy will receive a lump sum amount as the death benefit. This amount that is inherited by your loved ones can fulfill the financial needs of your loved ones.
Having a retirement corpus
When you are working, you may have debts and expenses that you incur on a recurring basis. However, excess expenses and liabilities may leave no room for savings. With no significant savings, you might face a financial crisis when you stop working. Hence, while you are earning, it is important to create a retirement corpus so that you can have a stress-free life after you retire. If you are wondering what has life insurance to do with retirement, know that there are many types of retirement plans. Some life insurance plans offer savings-cum protection plans where you get recurring returns, which you can further utilize for your retirement. Ensure that you conduct thorough research before choosing the plan that fits your needs well and is affordable, too.
Reduction of the tax burden
When you are working in India, you are liable to pay taxes on the money you make. However, there are several financial instruments available in the market that help in reducing the payable tax. One such major instrument people use for saving taxes is life insurance. As it is a win-win situation, where you save taxes and safeguard the future of your loved ones. The amount that you pay as premiums is exempt from taxes. Also, the sum cover of your policy is exempt from taxes too. Several individuals buy policies to reduce their excess tax burden.
Another rare and creative way people use life insurance is for charity. People who do not have any dependents or debts usually prefer to use their sum cover for a philanthropic cause. For any reason that you purchase a policy, ensure that the sum you choose is enough for that cause. Use a life insurance premium calculator to get an estimate of the sum cover you can get for a premium.
