Why Do I Need Life Insurance Policy?

5 Reasons Why You Need a Life Insurance policy?

Generally, the recent development in most countries of the world such as bridges and building collapses, plane crashes, accidents, sicknesses, and many other life uncertainty happenings around the wide world, individuals like you and me have started to doubt life uncertainties. Though there is little one can do to avoid such mishaps, insurance cover seems the only judicious product in the market to ease the financial burden an individual might face after such an event. Be it life or sickness insurance.

A human loss can bring a huge financial burden to a family. To mitigate or ease the burden, insurance policies act as an umbrella for protection.

However, an individual may only need life insurance if he has some people who depend on him for support. Then he deeply needs insurance to bring them to a point where they can easily assist themselves, or enough to provide for them for the rest of their lives. The choice of your executor is vital, as is having a will that clearly sets how your life insurance will be paid out.

One may be tempted to ask what then is a will? A “will” is a legal document written by an individual in the presence of a lawyer or the absence of a lawyer with regard to how his asset will be shared at his demise. Life insurance without a will brings problems for those who are made to benefit from the premium payment.

What is life insurance?

Life insurance is like a white blood cell in the human body and acts as a frontline of defense in protecting you and safeguarding your family when there’s any form of risk. Life insurance is a contractual documented agreement between an insurance company and a policyholder that’s properly arranged to pay out stipulated death benefits to the number of persons the insured listed to benefit from the insurance proceeds when he dies.

Also, When you buy a life insurance policy, you automatically accept to pay a certain premium to ensure your coverage is kept accurate. But if you die, the life insurance company pays out a death benefit to the listed number of persons you named as beneficiaries of the proceeds.

However, in the life insurance policy, you need to pay premiums for a specified policy term of the agreement, and the life insurance company inturns provide you with a comprehensive life cover, in return for the premium paid. Life Insurance protects the financial sustainability of your loved ones by paying a lump sum amount referred to as a “death benefit” if an unfortunate event occurs. Some life insurance policies provide you with a Maturity Benefit after the end of the policy term.

One may be tempted to ask, how does a life insurance policy work? since I have zero knowledge about the policy?

Basically, everything you needed to know depends on the type of existing policy. Term policies provide coverage for a stipulated period of time. That’s if you don’t die within the period, the insurer stores your premium and disburses it to those people who die. In the same trend, the insurer charges enough premiums to sustain enough profits for himself.

Also, for a whole life policy, the insurer charges enough so that over time, with investment income, the premiums accumulate to be enough to pay all the benefits and keep the profit for the insurer. If you buy a whole life, at the age of 36, you will pay premiums until you die which could be 52 years and above. Within that time, the premiums plus investments income on them will be more than pay for your benefits as well as part of the benefits for people who die young.

Can one purchase a life insurance policy without the knowledge of a policyholder?

It is practically impossible, this is because policyholders are the real policy owners and nothing happens without their permission provided they keep their premium payments up to date. So for one to purchase a life insurance policy he needs the knowledge of a policyholder.

See why you need a life insurance policy for yourself

1. You need life insurance for proper life stage planning: Life insurance planning will shape you with the best approach to plan your life financial goal as per your earning level. it helps you plan for your life stage need. It is very correct that they provide financial support when untimely death happens, but they also act as a long time investment. They enable you to meet your financial dreams, be child education, marriage, having a building of your dreams, and also help you to save for your retirement.

2. For security purposes (assured income benefit): With the help of a life insurance policy, your loved ones will stand the chance of enjoying some financial benefits (security), due to the financial support they receive on a regular interval from the insured company. This income enables them to meet up with their most pressing financial need when the insured person dies.

3. Safty and high return on investment: Money invested in a life insurance policy is safer and more secure compared to some other investment plans. However, the invested money will fetch you a good return and will be returned fully as a sum assured either after the completion of the term or after the demise of the insured. Either way, the money invested and the returns are safely paid back.

4. To promote savings and investment, the government has made many investment instruments eligible for tax savings. Life insurance is one such instrument. You can avail of a tax deduction of up to Rs 1.5 lakh towards the premium you pay in a year u/s 80C of the Income Tax Act 1961. Thus, you have the benefit of investment as well as tax savings.

5. Financial Protection: A major benefit of any life insurance plan is that it provides financial security to your family members. Life insurance policies include a death benefit. If you die during the term of the policy, then a pre-defined amount, known as the sum assured is given to your family members.

Finally

Life insurance is the best way you can provide financial assistants for your loved ones when you die. Immediately you open a policy, you start to pay a regular premium charge which could be monthly or yearly in exchange for coverage carried out. As long as your policy is active when you die, the insurance company will pay out a lump sum, also known as a death benefit, to the policy beneficiaries. To know if you have a good insurance policy, carefully check if the company you purchase from is reputable. At least 75% elements of trust. Also, you should buy a policy that meets your needs. In doing this, you need to consult a reliable broker to guide you on the best way to get your policy.k