There is no denying that you will have greater peace of mind if you know that you and your loved ones are financially secure from various unforeseen situations. Uncertainties in life could crop up at any moment, such as an unfortunate death or a medical emergency. These situations also include an accident or damage to your vehicle, property, etc.
Bearing the financial impact of these situations can burn a hole into your pocket. You may need to dip into your savings or your family’s hard-earned money. Thus, there is a pressing need of insurance for you and your family for proper coverage and financial support against all risks linked to your life, health and property.
Why is Insurance Important?
The importance of insurance should never be undermined. Insurance acts as a vital shield against unforeseen circumstances. It protects you from unplanned expenses and offers a financial cushion from accidents, illnesses and more. Insurance safeguards the financial interests of your family in your absence. It helps them cover immediate expenses and secures their long-term financial stability.
Below are some reasons why insurance is important:
Provides Financial StabilityThe need for insurance cannot be stressed enough. Insurance provides financial stability to families and helps them cover expenses like education, loans, housing, groceries and more. It also ensures financial stability during unexpected situations and helps cover medical expenses, property damage and other similar costs.
Promotes Personal Economic GrowthInsurance acts as a catalyst for personal economic growth by empowering surviving family members to pursue their aspirations in the absence of the policyholder. It provides a safety net to ensure your loved ones have access to essential resources, such as education. Your loved ones can also use the insurance payout to improve their financial situation by investing in businesses, purchasing real estate and more.
Generates Long-Term WealthLife insurance plans like endowment, money-back or Unit-Linked Insurance Plans (ULIPs) provide a means to accumulate wealth over time. These policies offer long-term savings and investment opportunities and allow you to secure your financial future. Life insurance can be used for various financial goals like retirement, a child's higher education and others.
Supports Families in Medical EmergenciesThe importance of insurance is particularly pronounced in today's times. Medical expenses are skyrocketing due to medical inflation and the increasing frequency of various illnesses1. Therefore, having a robust health insurance policy is essential at this time. Health insurance offers financial protection against medical costs. It provides an affordable solution by allowing you to buy policies with a high sum assured without straining your wallet. It also guarantees access to quality healthcare services in your hour of need.
Need for Insurance
Insurance plans are beneficial to anyone looking to protect their family, assets/property and themselves from financial risk/losses:
- Insurance plans will help you pay for medical emergencies, hospitalisation, contraction of any illnesses and treatment, and medical care required in the future.
- The financial loss to the family due to the unfortunate death of the sole earner can be covered by insurance plans. The family can also repay any debts like home loans or other debts which the person insured may have incurred in his/her lifetime
- Insurance plans will help your family maintain their standard of living in case you are not around in the future. This will help them cover the costs of running the household through the insurance lump sum payout. The insurance money will give your family some much-needed breathing space along with coverage for all expenditure in case of death/accident/medical emergency of the policyholder
- Insurance plans will help in protecting the future of your child in terms of his/her education. They will make sure that your children are financially secured while pursuing their dreams and ambitions without any compromises, even when you are not around
- Many insurance plans come with savings and investment schemes along with regular coverage. These help in building wealth/savings for the future through regular investments. You pay premiums regularly and a portion of the same goes towards life coverage while the other portion goes towards either a savings plan or investment plan, whichever you choose based on your future goals and needs
- Insurance helps protect your home in the event of any unforeseen calamity or damage. Your home insurance plan will help you get coverage for damages to your home and pay for the cost of repairs or rebuilding, whichever is needed. If you have coverage for valuables and items inside the house, then you can purchase replacement items with the insurance money
Helps with long-term goalsOne of the most important benefits of life insurance is that it enables you to save and grow your money. You can use this amount to meet your long-term goals, like buying a house, starting a venture, saving for your child’s education or wedding, and more
Useful for retirement planningLife insurance can enable you to stay financially independent even during your retirement. Life insurance plans like annuity plans provide you with a fixed income for life. They are low-risk plans that help you maintain your current lifestyle, meet medical expenses and meet your post-retirement goals
Provides tax benefitsLife insurance helps you plan for the future, while helping you save tax* in the present. The premiums paid under the policy are allowed as tax* deductions of up to ₹ 1.5 lakh per annum subject to conditions under Section 80C of The Income Tax Act, 1961. You can save up to ₹ 46,800/- in taxes* every year. Further, the amounts received under the policy are also exempt* subject to conditions under Section 10(10D) of the Income Tax Act, 1961.
Types of Insurance
There are several types of insurance plans available. Some of the commonly preferred ones include the following:
Life insurance :Life insurance is what you can avail in order to safeguard your family in case of your death during the tenor of the policy.The most basic form of life insurance available to buyers is term insurance. Life insurance helps secure your family financially with a lump sum amount that is paid out in the event of the policy holder’s death within the policy period
Health insurance :This is purchased for covering medical expenses revolving around various health issues, including hospitalisation, treatments and so on. These insurance plans come in handy in case of medical emergencies; you can also avail of cashless facility across network hospitals of the insurer
Child Plans :These insurance policies are savings instruments that help in generating lump sum funds whenever children reach a certain age for pursuing higher studies. In these plans, the life assured is that of the child or the recipient of the funds while the parents are the policy owners
Home insurance :These insurance plans cover any damages to the home on account of accidents, mishaps and natural calamities, among other such events
Auto Insurance :These are insurance plans for vehicles, including cars and bikes. These offer protection against natural calamities, damages to third parties (people who have incurred losses or been hurt in an accident with the policyholder’s vehicle) and also damages to the vehicle along with mishaps and accidents
Insurance is thus the need of the hour in today’s uncertain times -- evaluate your financial situation to choose a plan best suited to your future financial needs
Selecting the Right Insurance Plan
Selecting the right insurance plan is important to maximise its potential. There are a number of factors that can impact the effectiveness of insurance. Below are some of them:
Adequate CoverageMake sure to analyse your financial needs and select a plan that offers adequate financial coverage. Insufficient coverage may help you save some money at the time of purchase but can lead to compromised financial security in an emergency.
Ability to Pay PremiumThe plan's premium is another essential aspect to consider when selecting the right insurance plan. You may have to pay the premium for years, depending on the policy term. Therefore, aim to strike a balance between adequate coverage, premiums and your monthly expenses. If the premium is too high, you may find it hard to continue paying for the policy in the long run.
Policy DurationLife insurance policies are long-term plans and often last for many years. When choosing a life insurance policy, it is vital to consider various factors such as your age, the ages of your dependents, outstanding debts and future financial obligations. For example, if you have young children, it is prudent to select a policy that lasts at least until they become financially independent.
Personal AspectsEvery individual's needs are unique. The kind of coverage you need can depend on your age, gender, occupation and lifestyle. For example, if your job requires you to work in accident-prone areas, it may be advised to buy a high sum assured and a longer policy term to ensure your family's financial security in your absence.
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*Tax benefits under the policy are subject to conditions under Sections 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and cesses, if any, will be charged extra by redemption of units, as per applicable rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for more details.
1 Cost of treatment doubles in 5 years as medical inflation bites - http://timesofindia.indiatimes.com/articleshow/102961777.cms