Why opt for life insurance and not other forms of investments?
Posted on: 19/Jun/2018 5:41:12 PM
Often times we sit back and think whether to opt for a life insurance to protect the family. Or is that about picking an investment for paying insurance premium with any financial scheme for producing money eventually in the name of self-insurance?
Understanding self-insurance
It is basically a risk management technique where a portion of large sum will be allocated towards unexpected damage. Here, the money is invested with any financial body except that of an insurance product. It will be used for setting up good corpus to be used during emergency periods. On the other hand, in case of normalcy, the same can be used as self-insurance for any kind of damage or loss, be it life or non-life.
Well, when asked if it is good to opt for self-insurance, experts say we need to consider 2 main aspects of it when set against life insurance.
First is that you get the insurer gets protection right from the very first day in case of an insurance policy. Whereas, in investment corpus, you need to wait for years to grow it bigger. The sum paid for getting protection in case of a term policy will be just a small portion of the total investment needed for a corpus. To better explain this, consider your annual premium for 1 crore insurance is Rs 10000. In case of corpus, the monthly payment will have to be Rs 20,000 and should be paid for 15 years period. The investment paid will grow at 12 percent rate.
So, here are a few reasons to opt for life insurance policy for covering your entire family:
Coverage
For covering all your family members out of any kind of uncertainties, life insurance will be the best. For building the same, in case of corpus, it would take years. With an insurance policy, you can get covered right from the first day.
Growth and stability of money
With money being invested in stocks or mutual funds, the schemes are neither guaranteed nor market-lined. With life insurance, however, there are various insurance plans offering you guaranteed returns for the money you invest. You enjoy the benefits at the time of maturity and when claiming for death benefit cover.
Exemption on tax
Tax may be imposed on the returns obtained out of your investments made on various other financial instruments. However, the returns obtained out of tax under section 80C and 10(10D) of Income Tax Act will be exempted. This is one of the most important reasons for most families opting for life insurance for ages.
Easy access to cash
With life insurance policy, it is absolutely easy to gain access to cash at any point of time. Whereas if you make investment in other forms of financial instruments, this faculty will become unavailable.
Insurance cover
With any insurance policy, the protection comes first and then is the investment component. In case of financial instruments apart from insurance, no such insurance protection is offered.
Benefits on death
In case of mishaps like death, the family of insurer would get the assured sum. Even in case of non-payment of insuranance premium, the death benefit cover will still be paid to the family members. This will be missing in case of other financial instruments.
