Why Life Insurance?

Firstly, What is Life Insurance?

Life insurance is a financial product designed to provide a safety net for your loved ones or dependents in the event of your death. It ensures that your loved ones are not left struggling financially if you are no longer around to support them.

In simple terms, it's a contract between you and an insurance company where you pay regular premiums, and in return, the company agrees to pay a sum of money to your beneficiaries if you pass away during the policy term.

Buying life insurance is an important financial decision for many individuals and families. 

Why Life Insurance?

Here are some of the key reasons why people purchase life insurance:

1. Financial Security for Dependents

• Income Replacement: Life insurance can provide a financial safety net for your family by replacing lost income in the event of your untimely death.

2. Debt Repayment

• Mortgage Payments: Life insurance can ensure that your family can continue to make Property Loan (Home/Plot) payments
• Personal Loans: It can cover any outstanding debts, ensuring that your loved ones are not burdened with your financial obligations.

3. Education Expenses

• Children's Education: Life insurance can provide funds for your children's education, helping to ensure they can pursue their academic goals without financial strain.

4. Peace of Mind

• Stress Reduction: Knowing that your loved ones will be financially secure can provide peace of mind, reducing stress and anxiety about the future.

5. Tax Benefits

While tax benefit should be last reason for you to invest in life insurance, it is necessary to be aware of the tax benefits government of india is providing. Sadly, You have to pay GST of 18% while buying a Term Insurance (a type of life insurance), you hardly save very less by declaring. But something is better than nothing. Here are the tax benefits under Old Tax Regime

• Section 80C: Deduction up to ₹1.5 lakh on premiums paid.
• Section 10(10D): amount received from a life insurance policy, including bonuses, provided
• 1. Premium paid should not exceed 10% of the sum assured for policies issued after April 1, 2012. i.e. ensure your sum assured shouldn't be greater than 10times of the premium paid, Otherwise you have to pay tax on the maturity amount.
  2. proceeds from ULIP (a type of Life Insurance) shall be taxable if the annual premium exceeds Rs 2.5 lakh in any year of the term of the policy.  

​ ​Click here to know more ULIP 

• Section 80D: Deduction on premiums paid for health riders up to ₹25,000 (₹50,000 for senior citizens). Eg : - Accidental death benefit, Critical illness coverage

Conclusion:

Life insurance is a critical part of a comprehensive financial plan, providing security and peace of mind. By choosing the right type of life insurance and coverage amount, you can ensure that your loved ones are protected and financially secure in the event of your passing.

#walkthetalk : I bought a Term Life Insurance plan from MAX Life (MAX Smart Total Elite Protection) in Dec 2023.

Best Term Insurance Plans for 2025 in India

• Max Life Smart Secure Plus
• Tata AIA Maha Raksha Supreme
• Bajaj Allianz Smart Protect Goal
• ICICI Prudential iProtect Smart

Thanks,

Honvest Team.