Friday, 12 February 2016

9 Key Benefits of Having Life Insurance Policy | Benefits of Life Insurance


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Insurance: By definition, insurance is a legal agreement between policy holder and insurance company; in which, one pays premiums (policy holder), and other pays (insurer) on the event of loss.  

Importance of Insurance: Insurance plays a significant role in an individual’s life. It covers an individual against unforeseen events like; Life Insurance covers insured person against death, Health insurance provides coverage for medical expenses incurred in a hospital, Mortgage insurance provides cover for mortgages and loans taken by insured person etc; and insurance also protects individual’s family against financial crisis by giving financial support to them. Many people face a common phobia that what will happen to their family if they die? It is indeed that death is certain but the time of death is uncertain; insurance cannot stop the occurrence of death, but insurance can certainly protect your family against financial crisis upon your death.

Benefits of Life Insurance

In this post, we will be discussing on the benefits of Life insurance. In this modern era, we have penalty of options to invest but no one is like insurance. Insurance provides safe and profitable long-term investment options along with specified death cover for example; Money back insurance provides insurance cover with money back options. Here are some advantages of life insurance policies;

Risk Cover: The main purpose of an insurance policy is to protect an individual or group against certain risks; that’s why, insurance is also known as a risk management technique. On the event of loss beneficiaries receive specified risk cover for example; in life insurance policy, nominee receives a specified sum assured; if the insured person dies.

Family Safeguard: Insurance offers peace of mind; it ensures that your loved ones are finically secure upon your death. In this day and age of uncertainties, death can arrive anytime; and if you’re the only earner of your family, then you can imagine that what kind of difficulties your family might face upon your death?  Such things may cause anxiety; and having a life insurance policy subsides, such anxieties.

Safe and Secure Investments: Insurance is a secure investment method; in insurance, an individual invests his/her money to meet his/her future goal (For example; planning to get married, planning for children education, planning to buy house etc), and to safeguard his/her family against unforeseen events. Insurance offers fixed returns in case of death or maturity; and also offers a regular income source when insured person gets older.

Health Protection: Almost everyone is exposed to certain risks related to health. So we should be prepared financially for any misfortune which may cause us hospitalized. Having a health protection plan either through buying riders with life insurance plan or buying a separate health insurance policy gives us peace of mind that we are able to cope any financial burden due to a health issue for example; illness or accident.   

Financial Freedom after Retirement: Everyone wants to live a hassle free life after retirement. Having an insurance policy can make it possible because it offers fixed sum assured on maturity.

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Loan Facility: Some insurance policies allow policyholder to take loan against his/her policy. Benefits offered by an insurance policy remains unaffected if policy holder takes loan against his/her policy; and also if policyholder does not repay loan amount, then the amount will be deducted from cash value of his/her policy.

Dividends or Bonus: Many insurers offer dividends in case they get large gains that were made through investment in capital market. Dividends are the extra benefits payable to policy holders; in case of gains. Basically, insurance companies declare two types of bonuses; Reversionary Bonuses and Terminal Bonuses. Reversionary bonuses are guaranteed; whereas, Terminal Bonuses are subject to gains.    

Tax Benefits: Insurance confers tax benefits on both income and returns of policy. Therefore, investing in insurance saves your money.

Economic Development: The contribution of insurance sector in economic development of countries is very high. Insurance companies accumulate huge funds through premiums paid by policyholders. Insurers invest these funds in different sectors; which are used for economic development of countries.
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