Budgeting and taking expenses into perspective is a great idea to keep your spending habits under control. Tightening your purses, however, can invariably lead to a tricky situation wherein you're often left scratching your head trying to figure out which expenses require to be kept under check while considering which ones are worth investing in. In that regard, there are certain expenses which are best opted for when the time is right instead of procrastinating and pushing it to the future – life insurance for instance.

Life insurance is one such misunderstood ‘expense’. Whenever the topic of insurance comes up, it’s likely to have people on the fence who view it more as a luxury than for what it really is –an indispensable form of financial security for families. Although talking about insurance might not be exciting, the truth of the matter is that you will seldom come across someone complaining about life insurance whenever they’ve needed it. Fact is, owing to large-scale misunderstandings and misconceptions revolving around life insurance, most people choose not to spend their time and energy to uncover the truth behind insurance.

Life Insurance – Why it might sound unimportant

Life insurance can be classified as one of those expenses which are easy to skip. After all, it’s usage is entirely based on the probability of certain events from occurring. This also means that you might not always see an immediate result even after paying premiums year after year. Life insurance can seem complicated and overwhelming at first which causes many people to leave out insurance as they feel that nothing badwould ever occur to them. This is another reason why several individuals often tend to put off buying life insurance until there is a critical life event that pushes them into purchasing it. Make life insurance a priority today and your finances will thank you later for it.

Life Insurance – Why you need it?

Life insurance is designed to provide financial protection in case of an emergency situation. Thereon, it’s quite similar to say, a car insurance but in this case, it provides protection to your most valuable asset. Thereafter, life insurance is one of those products that form a crucial component of your financial planning process and hence worth paying for – after all, it could prove to be a bargain over the long haul. Here are some of the benefits of being covered under life insurance:

• A life insurance plan is designed to give you the peace of mind knowing that your beneficiaries will be looked after even if you’re no longer around. Thus, having a life insurance ensures that your dependents who rely on your income don’t suffer financial hardship in your absence.
• From paying for day to day needs to compensating for education costs for your kids, having a life insurance plan can help replace future income lost. The proceeds your family stand to receive will ensure that they continue to live the life you always envisioned together.
• Another important life insurance feature is the option to attach riders (add-on's) that offer benefits over and above the standard policy at a nominal cost. An untoward accident which leaves you impaired or a terminal illness that requires long-term care has the potential to ruin you financially. Riders such as permanent or partial disability rider, loss of employment cover rider, critical illness rider, waiver of premium, can increase the face value of your policy while providing the added protection you require.
• If you find yourself saddled with debts, the last thing you would want is for your loved ones to be burdened with your debts in your absence. The proceeds from a life insurance policy and can be used by your beneficiaries to repay any debts you might have run up.
• Life insurance comes packed with a gamut of tax benefits as well. Premiums paid are tax-exempted under section 80C (up to Rs. 1,50,000 lakh) of the Income Tax Act, 1961. Moreover, the lump-sum your family stands to receive at maturity/death benefit is also tax-exempted income under section 10(10D) of the Income Tax Act, 1961.*

The Bottom Line

You may feel tempted to save time and money by leaving life insurance out of your portfolio – but it can prove to be a major folly. While families continue to struggle financially, there has never been a more appropriate time for people to invest in an adequate amount of life insurance. Make sure you don’t skimp on life insurance.

*Disclaimer: Taxes are subject to change as per tax laws

AN May 77/18

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