Investing your money in avenues generating sizeable returns is the key to building wealth. As you analyze different investment plans and evaluate their pros and cons, you might come across life insurance as well and wonder if it is a worthwhile investment option.
Here are some pointers to help you decide.
Reasons to invest in life insurance
Life insurance lessens the financial problems your loved ones might run into if an unfortunate event occurs with you. But this is not the only benefit of life insurance. Many life insurance products also offer investment options. You can choose to tap into the stock market’s high return-potential with Unit Linked Insurance Plans (ULIPs) or play it safe and get guaranteed returns with traditional endowment policies.
Here are the many benefits of investing in life insurance:
Ensuring risk cover
Life insurance offers financial protection against life’s uncertainties. In case of an unwanted event, your nominee receives the assured benefits. This can help them meet their living costs as well as fulfil their life goals even in your absence.
Building the habit of saving
You need to pay your life insurance premiums regularly to keep your policy in force. Such disciplined, systematic payments inculcate a habit of savings in you. When you have to pay your insurance premium, you tend to spend less as you want to make sure you have the premium amount ready on time. With budgeting and prioritising your spend, you develop the inclination to save more and build up the funds you need to finance your life’s milestones.
Saving on income tax
Life insurance premiums make you eligible for deductions* on your taxable income. As per Section 80C of the Income Tax Act, 1961, you can avail deductions up to ₹ 1.5 lakh for such premiums. If you add a health-based rider with your life insurance plan, you can get further deductions up to ₹ 25,000 under Section 80D.
Moreover, the proceeds from life insurance are also exempt from taxes* under the provisions of Section 10(10D). These benefits, not generally found in other investment products, can reduce your income tax liability and effectively increase your savings.
Protecting your money
Many life insurance plans guarantee a sum assured. Such plans keep your hard-earned money safe from market conditions. Many reputed insurance companies also offer bonuses, helping your investments grow. The returns from life insurance plans can help you meet your life goals, such as children’s higher education, or financial freedom in retirement.
You can also borrow against your policy’s cash value in financial emergencies.
Navigating the capital market
ULIPs allow you to switch your funds around different asset classes. In a downturn, you can shift your allocations to debt funds, minimising losses. When the market recovers, you can change over to equities, and see your profits soar. You also have the option to switch to better-performing funds. By remaining patient and continuing investing throughout your policy tenure, you can earn excellent profits.
Gain peace of mind
While wealth can give you the lifestyle you want, peace of mind is priceless. Life insurance guarantees this peace. Buying life insurance assures you that your loved ones’ needs will be met in every exigency.
Life insurance offers a lot of benefits. It safeguards your family against economic challenges in case of an eventuality. It helps you reduce your income tax burden. If used properly, it can also help you achieve financial stability. Therefore, even though it is not a direct investment product, it is an essential tool you should include in your investment portfolio.
People like you also read...
* Tax benefits are subject to conditions under Section 80C, 10(10D), 115BAC and other provisions of the Income Tax Act,1961. Good and Service tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.