Why is It Critical to Get Life Insurance?


Life insurance is basically a kind of protection against any financial losses of an insured person if by any chance a premature death occurs. One of the most important financial decisions is to buy a life insurance irrespective of how much one earns. By buying a life insurance policy you basically secure your family’s financial future. After the insurer dies it is passed upon to the named beneficiary. Life insurance is thus basically a contract between an individual and life insurance company. There are three main components of a life insurance contract: Death Benefit, Premium Payment and Cash Value.

Death Benefit Explained

Death Benefit: This death benefit is basically the amount of money the family of the insured person will receive after the insured person dies. This amount depends on how much the insurer had paid in his life time to the insurance. There is a certain amount of money that one can pay and then on that money interest is given by the company. So when the person dies the family will receive the interest plus the actual amount if the insurer has met the criteria required set by the company.

What is the Premium Payment?

Premium Payment: Premium payment is the amount of money that a person assures keeping in mind factors such as his age, personal and family’s medical history, lifestyle etc. If the person pays the premium rate (which varies from company to company) then the company pays the death benefit to the family.

What is Cash Value?

Cash Value: The cash value is the amount of cash the insured person will get back by the company on cancelling the contract. The cash value over the time accumulates on a tax free basis and the insurer can use up the money when he is alive but that reduces the death benefit also.

Why Life Insurance Benefits Everyone

Life Insurance is an important and critical financial investment which every person should invest on. There a number of reasons listed below as to why life insurance is critical.

  1. It provides financial security to the family when the bread owner passes away. This is a very crucial factor because the bread owner runs the house, gets the basic needs fulfilled like children’s education etc. Looks after the family in all ways and when the person passes away the entire family will suffer in several ways. The life insurance policy then takes care of the financial part.
  1. The Life Insurance Company also deals with debts when the person passes away, whether it is a personal loan, home loan or any kind. The family is not pressurised.
  1. This helps in achieving long term dreams because this one sort of investment for a long period. This also provides with diverse investment options along with different types of policies.
  1. The Life Insurance also provides help financially every month after retirement. If one saves money in pension plans then after retiring there will be flow of money every month for rest of their lives.
  1. The purchasing of Insurance should be done when one is at a younger age. If one has invested in a student loan or anything then one should opt for choosing a life insurance scheme. There are certain rules of life insurance policy that when one is fit and young they get the policies but if an old aged person who is physically not well applies for it then the person is not granted the schemes.
  1. There are policies in the life insurance scheme where they also take care of one’s business.
  1. A lot of tax is saved.

 

Also Read About: Tax Benefits of Taking Life Insurance

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