How life insurance can be a part of your wealth-building plan

Doesn’t matter where you start from, wealth-building can turn your life around? A well thought out wealth building plan can improve your financial situation. There are many options in the market for the same purpose but if you want to build your wealth fast then investing in a vehicle such as insurance can accelerate the process.

If you own a car, you need to have car insurance. If you own a bike, you need to have a bike insurance. Then why life insurance is still neglected by our society as a large. Life is an important asset and needs to be secured with proper insurance. The sum assured assists your loved ones financially after your demise. Life insurance also acts as an important tool in wealth building process by providing a guaranteed payout of a relatively large amount upon the death of the insured. Hence, investing in life insurance should be a part of everyone’s financial plan.

Listed are some of the benefits of Life Insurance as a wealth building tool:

Immediate availability of cash

Life insurance cover enables your family or loved ones an immediate access to the much-required cash they need after your demise. This cash will help them lead their life smoothly without any financial burden depending upon the type of plan. Life insurance may come handy if there are certain unpaid dues or liabilities after you. Certain life insurance companies also offer to pay for funeral expenses which can be a big expense for your family after you.

Tax-free

Income accumulated from Life Insurance is non-taxable as per Section 10(10D)  Income Tax Act. So the lump sum amount received by your family will be a good wholesome amount without any tax deduction.

Pay off Debts and Liabilities

After your demise, your family can be burdened financially if there are any unpaid debts or liabilities. Life Insurance as a financial tool can pay off all the remaining liabilities and debts. Thus, coming as a strong financial tool and support for your family.

Bridging the Wealth Gap

A good lump sum amount can pay off your child’s education fee and marriage expenses. Such expenses can be huge and can be taken care off easily with the help of Life Insurance.

While one is looking for a life insurance, there are 3 basic aspects that are primarily related to life insurance, and they are as follows –

•    Premium amount - An insurance premium is the amount of money that an individual or business must pay for an insurance policy. The insurance premium is income for the insurance company, once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy.

•    Death Benefit/Sum Assured – This is the money which the insurer assures to pay to the nominee or the policy beneficiary of the policyholder after his/her demise. Death benefit varies based on a number of parameters.

•    Term – An insurance policy provides protection only for a certain period of time. This is called the term. It is very crucial for the life insurance policy, and it could vary based on the type of policy chose.

Factors Affecting Life Insurance Plan

Life insurance is the basic necessity for an uncertain life. It is very important to choose the best Insurance plan that suits an applicant.  There are various factors that should be considered before buying an effective life insurance policy-

  • Age

Age is very crucial factors when one applies for the life insurance policy. If the applicant is young then there is less risk of death and hence the younger individual will receive policy plan at lower rates.  At a young age, people often have dependents like parents, siblings or spouse and in case of any mishap, a proper safety insurance cover is mandatory.

  • Current Health and Health History

Life insurance policies demand the current medical examination in order to check for any health risk that may arise as a future problem. Along with the current health, health history of the applicant is also an important factor that is considered for life insurance. In case of any past major health issue, the applicant is offered an insurance plan accordingly.

  • Gender  

Gender of the applicant also matters while one is looking for the best life insurance policy. For example plan for male and females may vary on the basis of their preferences, because as per the analysis women live longer than men.

  • Profession  

The profession of the applicant is also an effective factor for life insurance policy. For instance, the preference of life insurance applicant who is labor class worker, under high-risk activities and life challenging sectors like the mining industry, oil and gas mines will differ due to their risk-taking profession as compared to the one who is working in a much secure atmosphere.

  • Smoking and Drinking

Applicants who are prone to harmful addictions like alcohol and smoking have to pay a different premium for the Life Insurance policies; as such habits can lead to critical diseases like cancer and other fatal diseases.

It is important for everyone to plan ahead and prepare one's family for the inevitable. During the tough times, life insurance may ease your family’s financial burden. It is advisable to invest early and reap the maximum benefits you could out of your policy. 

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com