Wednesday, May 9, 2007

Insurance.. Why take LIFE insurance?

Insurance.. Why take LIFE insurance?
Life Insurance is bought by almost everyone. And most people buy it for one core reason – to save tax! But this should not be the only reason to buy insurance! Here we have explained some of the reasons why life insurance is a VERY important part of personal money management!

Passing away early
One is never sure about life. We often come across people claiming that nothing is going to happen to them; that they are too young to pass away. But do they really know what the future holds for them? Just read newspaper headlines about the recent Tsunami, the earthquake, bomb blasts etc. that took place and such calamities to understand how the future can be unpredictable.
Individuals need to insure themselves to secure the future of those who are dependant on them; especially if they happen to be to only earners in thire family. You wouldn’t want your family to go through hardships or rely on others/relatives, etc. This, in fact, is the MAIN reason why one should buy an insurance policy!

Living too long
Advances in the field of medicine have grown by leaps and bounds over the past few decades. Due to this, life expectancies have gone up. This causes another problem for individuals. It is generally observed that individuals who tend to live way beyond their earning years like say, till the age of 85 or 90, usually face a problem coming to terms with increasing costs of living. Also take into account the increase in medical expenses!
Insurance, if bought at the right time for the right amount provides the required money in such times. Individuals could opt for a pension plan offered by insurance companies, which suits their needs in terms of income, retirement age and expenses post-retirement. Such plans provide an "annuity", which means that individuals keep getting a fixed sum every month/year after they have retired.

Painful existence
Maybe an individual has planned well during his earning years to secure himself financially. He has created assets in such a way that he has a comfortable monthly income to support his family expenditure.
But what if an individual were to have a health problem afflicting him or his spouse? What if the treatment were to cost him a sum beyond his financial capacity? Here again, life insurance can help you out in two ways. One, by way of a "medical rider" that provides for money in case of any medical emergencies! These riders are taken along with the life insurance plan and help cover the medical expenses.
And secondly by allowing the individual to surrender the insurance policy. Of course this should be done only in case of an urgent need like a serious health problem. Surrendering the policy will help in the generation of a lump sum amount that can be used for covering the high cost of medical expenses.

Tax benefits
Life insurance has always been bought more for tax benefits than to insure human life. But the role of life insurance in an individual’s "tax planning" cannot, in any way, be undermined.
Individuals can now invest upto Rs.100,000 in insurance premium to avail of a deduction from taxable income.
Now that the extreme need for Life Insurance is understood, you must get your self some life insurance. If you do not do it for your self or if you do not even want to do it to save tax, do it for your family! If you have people who depend financially on you, you MUST MUST MUST get life insurance!
There are many different Life Insurance Companies and many different life insurance plans. It is best to get your self a life insurance agent instead of deciding which plan to go in for yourself!

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