We all want to achieve ‘financial security’ in life. Different people have different interpretations regarding this but overall we all understand the basics of this motto in life. This is your first step on the long journey called ‘financial well-being’.
Why Are Some People Reluctant to Take Life Insurance?
Sometimes we remain naive and do not want to understand the factors that can result in bringing our family closer to financial distress. This is unpredictable and can happen to anyone. Yet we think that chances of something happening like this to us are quite low.
The unexpected death of the breadwinner of the family can be a turning point in anybody’s life. It is a common scenario that everyone sees around them. In such cases, life insurance can be helpful for family members.
However, if you have not taken the right insurance coverage, it won’t be of much help for your family. There are so many cases where the family has received a meager amount of Rs 10 lakh or less. This amount cannot help your family to survive on. A life Insurance premium calculator helps you choose the right plan with the right coverage.
Chronic Illness Can Happen to Anyone
No matter how healthy you eat or how much exercise you do, anybody can fall victim of the chronic illnesses. This can happen to anyone in your family and can quickly put the whole through trauma and distress. Diseases like cancer, kidney related problems or neurological disorders takes a long time to get properly treated and also require a lot of money for medical procedures.
Adulteration in food products are common these days and the fast life that everybody is living today, it is normal to face lifestyle-related diseases. Diabetes, hypertension, obesity has become some common enemies of people today. Hearing about these conditions have become quite common. The risks of these diseases have increased today,and we are on the verge of getting these diseases easily.
Still, a common man is unable to calculate the risks involved with it and remains confused. They are not able to understand that these situations are life-threatening.
Uncertainties in Life
People assume that they have a good job, a comfortable salary, and a proper lifestyle, so there are no worries about money. However, you shouldn’t be so sure. The workplace is very competitive today, and job losses have become very frequent even to those who are loyal to their jobs.
High paying jobs aren’t a guarantee that you are safe and secured for the rest of your life. Nothing is permanent in life, even the wealth that you have earned and the job you are so loyal about for the last 20 years. So why are we unable to realize these risks?
Well basically, we humans are poor at calculating the probability. Many psychological factors are also responsible for it. The human mind works on stories and anecdotes rather than data and statistics. We will fear from the experiences that have happened to anyone else but undermine the risks that are not in hindsight.
Let’s take the example of earthquakes and cyclones. They are a big cause of damage to life and property, and yet we think that the risks involved with them are very minute. However, one should not underestimate the natural calamity as it is not predictable.
Sometimes risks also occur because we have wrong assumptions. Regular monthly income is one such thing. A question needs to be asked at this point. What if it no longer remains regular income? What are the consequences of this wrong assumption? What will be the consequence of financial planning in case you do not get a salary raise or bonus on it for five years? This has happened to many people after the financial crisis in the US.
What Can You Do to Reduce This Financial Distress?
Get proper insurance in place. Plan your life ahead and take a number of insurance policies as per your needs. There are a number of insurance policies such as hospitalization insurance, critical illness insurance, life insurance, and another type of insurance such as- insuring the property for any natural calamity like earthquake, fire,etc.
It depends on an individual person’s needs and choices and should be taken decisively. Choose the right insurance policy, which covers you against all the risks by using life insurance premium calculator.
Keeping Funds for Emergency- You should keep liquid funds in place in case you or your family meets an emergency. This helps in easing your mind during the distressing time and protect you against the misfortune that has struck you unexpectedly.
What Do You Mean By Life Insurance?
Life insurance is basically meant to provide an around protection by giving financial coverage in case of unexpected events such as an accident or death.
There are basically two categories of life insurance- Whole Life Insurance and Term Life Insurance. Whole life insurance basically a kind of permanent insurance system ( commonly known as cash-value life insurance). While term insurance, on the other hand, provides coverage for only a certain period of time.
Term insurance ends after the expiration of the policy. It basically serves one objective as it provides just death benefit and nothing else.
While whole life insurance policy comes costly as it has an extra component, often referred to as the “cash value”.“ Cash value” refers to a savings account which comprises of the premiums you have paid for your policy. On this amount, interest is being paid by the life insurance company.
The interest received is actually the dividend earned by the insurance company from the annual profits. However, most insurers assure a minimum return on a yearly basis.
According to the viewpoint of insurance agents, the whole life insurance is a favorable option because on their part it is more profitable to sell and also because it offers a safe savings option.
How Can Life Insurance Policy Help You In Your Distress Period?
The life insurance policy basically consists of three parts-
Death Benefit- The death benefit offered by the insurance policy is tax-free. No tax is levied on the cash given by the insurance company in case the person insured dies.
Benficiary of the Policy- The beneficiary is the one who receives the fund after the death. Your spouse, kids, your business partner, a trust or an NGO,a friend- anybody can become your beneficiary. Also, there is a provision of mentioning more than one beneficiary.
Premium Paid- The premiums paid are an important component of the policy and is generally paid either on a monthly or annual basis.
What are the Advantages of the Life Insurance Policy?
There are a number of benefits of the life insurance policy.
Security- As long as you pay your premiums on time and there are no other problems with your policy, it will stay in force and provide you with lifelong protection.
Costs of Premiums Don’t Change- The costs of premiums do not change with inflation or if you grow old or get sick. This is another benefit of the insurance plan.
Good Returns on the Investments- Life Insurance Policies provides better returns when compared to other options. In most cases, the life insurance schemes provide us with a bonus which is not provided by any other type of investment scheme.
The funds invested in the life insurance policy is not only safe but also provides coverage against risks. The amount invested pays good returns and is returned in full as sum assured either on completion of the Term of the policy or the death of the person insured. In both the scenarios, the money you have invested comes back to you.
Enjoys Tax Benefits- Life Insurance Policies also enjoys tax benefits. The tax benefits are enjoyed under the section 80C of the Income Tax Act. It is a good way to reduce tax liability for the salaried class.
Rebates are provided on the investments made.
Can Also Be Availed- An added advantage of the life insurance policy is that in case you are facing a financial crunch, you can easily take a loan against the policy amount. According to the provisions of the policy, loan amount that can be taken is either a percentage of the cash value or the assured sum.
Income Benefits- The life insurance policy provides protection and also provides income at regular intervals. This income can prove beneficial for paying regular expenses like- rents, electricity bills, educational expenses of your children,etc. This can cover up the income loss that has occurred because of the death of the breadwinner of the family.
Rider Benefits- Riders are also available with the main life insurance policy. These riders serve the purpose of providing extra insurance coverage. These riders serve the purpose that is outside the scope of the policy.
Thus, they provide comprehensive protection. Riders can be availed for critical illness, accident, income, or waiver of the premium. They provide coverage when your main policy may not be able to provide you the benefit. Riders can also be helpful in providing tax benefits.