Why is life insurance necessary?

 Why is life insurance necessary?

Why is life insurance necessary?


In my opinion, having life insurance shows that a person loves his family so much that he wants to take care of his family even after his death (death). He wants his family to be happy, financially strong even after his departure. 


The benefits of life insurance accrue to the nominee declared by the policyholder after his death. Generally, the purpose of life insurance is to protect the family of the policyholder from financial difficulties after his death. Most of the people know the benefits of life insurance but still they do not buy it. 


Today here you will find some benefits of having life insurance, after reading which you will be able to decide whether you need it or not. So let's start this article to know in more detail that why it is important to have a Life Insurance




What is life insurance ?


By definition, insurance is a legal agreement between the policyholder and the insurance company in which the insured pays the premium to the company and in return the insurance company is prepared to pay compensation for specified loss, damage, illness or death. 


As mentioned above, insurance is a legal agreement in which the policy holder and the insurance company sign with mutual consent. Life insurance is a type of insurance in which the insured person pays the premium under a legal contract and in return, the company gives him financial assistance in the event of total disability or a sum assured as decided by him in the event of his death.


Why life insurance is important.


Insurance plays an important role in the life of every person. It covers a person against unforeseen events (like life insurance covers the insured against death, health insurance provides coverage for medical expenses incurred in hospital) and provides financial assistance to the insured against financial distress. He also protects the family.


 A common fear many people face as to what will happen to their family if they die is that death is certain but the timing of death is uncertain. Insurance cannot prevent the occurrence of death but insurance can certainly protect the insured person's family against financial distress in case of death. If a person feels that after his death his family will be in financial trouble, then it is mandatory for such person to have life insurance. 


You can also call it a kind of responsibility which a person performs for his family. In this modern age, we have a lot of options to invest but none is like insurance. The insurance offers profitable long-term investment options with specified death cover for example money back insurance offers insurance cover with options like sum assured return. 


In which if the person does not die till the end of the policy term, then the sum assured is given to him and if he dies during the term of the policy then the sum assured is given to his family. The advantages of life insurance are given below. 


This post is a part of our How to Buy Life Insurance series in which we have tried to explain how to choose a good policy that meets your future needs. What is life insurance and what are its types Benefits of life insurance and why it is important do ask.


Benefits of life insurance.


1. Accident/Risk cover

2. Peace of mind

3. If someone has a loan

4. Safe investment

5. Health protection

6. An efficient life after retirement

7. Loan / Loan facility against insurance 




1. Accident/Risk cover


When we try to know the benefits of life insurance, the first benefit in our list comes in the accident or risk cover. The main objective of an insurance policy is to protect an individual or group against prescribed risks. This is the reason why insurance is also known as a risk management technique.


 Life insurance is designed to provide financial support to the family after the death of the insured. If the life insured dies in an accident during the term of the policy, then the nominee who is usually a member of the family, is given the benefits of life insurance or sum insured. This does not reduce the grief of losing his family member, but saves him from further miseries such as financial constraints. 


It is generally seen that after the death of the head of the family, the family comes in a lot of financial difficulties due to which the family has to sell the house but having a life insurance policy can save the family from financial difficulties. Insurance is not a compulsion it is a responsibility that everyone should fulfill for their family.




2. Peace of mind 


Peace of mind comes second in our list of life insurance benefits. Usually the head of the family (who is the only earning member in the family) is worried about how his family will survive after his departure. 


If such a person has life insurance then it provides peace of mind that his loved ones will be financially secure on his death. In this age of uncertainties, death can come at any time and if a person is the only source of income for the family then you can imagine what kind of hardships his family may face on his death. and having life insurance reduces such concerns.


3. If someone has a loan


Let us understand this with an example. Suppose John has a loan of ₹ 10 lakh and he is paying it in installments. Now suddenly one day John dies in an accident, so in this situation it is now the responsibility of paying the debt taken on John's family. 


John was the only earning member of the family. So what will the family do now, how will it pay off the loan, by selling your house or selling any of your assets, wait! The family didn't need to do anything like that because John was a smart man and he knew it could happen one day so that's why he bought a life insurance policy. 


Now the family can pay the loan from the amount received from the insurance claim and can also survive with the remaining money. So now you understand how important it is to have life insurance, imagine if John's family does not get the benefits of this life insurance.


4. Safe investment


Insurance is a safe investment. In insurance, a person invests his money to meet his future goals (for example, planning to get married, planning for children's education, planning to buy a house, etc.) and against unforeseen events. Even to protect his family. The benefit of such life insurance ensures that we are investing our money at a safe place. The insurance provides assured returns in case of death or maturity and also provides a regular income source when the insured person becomes old.


5. Health protection

 

Almost everyone has to face some health-related risks, so we should be financially prepared for any unfortunate event that can get us admitted to the hospital. Buying riders along with a life insurance plan or buying a separate health insurance policy gives us peace of mind that we may face any financial burden due to health problems for example illness or accident. 


Note here that life insurance policy does not provide cover for health related issues, for which separate addons have to be taken. But in case of complete disability, sum insured is available in life insurance by the insurance. The benefits of life insurance can be increased by taking additional addons.


6. An efficient life after retirement


Everyone wants to lead a hassle free life after retirement. Having an insurance policy can make this possible as it offers a fixed sum assured on maturity. On completion of the policy term, the insurance company gives the option to the policyholder to convert the benefits received in his policy into monthly pension. By which he will get some money every month as pension and he can live his life well.


7. Loan / Loan facility against insurance


Some insurance companies allow the policyholder to take a loan from their policy. If the policyholder takes a loan against his policy, the life insurance benefits that he gets remain unaffected. If the policyholder does not pay the loan amount, the amount will be deducted from the cash value of his policy. 


This facility is available in policies that come with policy investment components. Under this facility, if someone has a life insurance policy and needs money, then he can fulfill his money requirement by taking a loan from his policy.




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