If you’re going to purchase an insurance policy, you should be aware of what you hope to achieve from it. Think about the top 5 applications for life insurance.
- Taking care of dependents – Would the loss of your salary if you were gone tomorrow put a strain on your dependents’ finances? If so, life insurance can close the gap by offering funds for investments that would yield income. This is very useful if you have a large number of liquid assets, such as real estate or a business. Your dependents could otherwise find it difficult to make ends meet unless those assets create a considerable income or are simple to sell to raise money. However, if something unfortunate were to happen to you, your family might struggle to cover their costs and achieve their objectives. A life insurance policy can be useful in this situation. The nominee named in the life insurance plan receives the death benefit payment and may utilise it to cover expenses and advance their goals in life. A life insurance calculator is a tool you may use online to determine the amount of coverage required based on your needs.
- Making inheritances fairer – Let’s say you want to leave certain possessions to certain children or heirs after you pass away. Maybe you desire a certain person to possess a cottage, a company, or expensive jewellery. Giving cash to the other heirs, such as insurance benefits, can be a fantastic approach to equalise the inheritances if you would like to give an equal sum to each of your descendants. Any person would want to leave behind a sizeable fortune for their children and future generations once they pass away. The life cover of a life insurance policy can be useful in these circumstances.
A person can purchase a whole life insurance policy with a significant life cover that will protect them through age 99. And should they pass away, the death benefit payment that the nominees will get can function somewhat like an inheritance. The nominees are then free to put the money to whatever use they want. So, without taking on too much risk, you can realise your ambition of leaving behind a legacy for your family with the help of a life insurance plan. Life insurance policies also offer the insured life insurance tax benefits.
- Resolving debts – It might be quite beneficial for your heirs or business partners to have your personal or commercial obligations paid off after you pass away. Insurance may offer the funds required to settle these debts. Instead of paying off your mortgage, think about purchasing term insurance coverage. The repayment period for any substantial debts you have taken out for things like building or buying your dream home or funding your kids’ education can last for many years. In the meantime, if something were to happen to you, your loved ones might have trouble paying back the loan and any other debts you’ve left behind. However, if you have life insurance in your investment account, you might stop all of that from happening. They can pay off all outstanding loans and other commitments you may have left behind with the lump sum death benefits award that they receive, leaving them debt-free.
- Reduce tax burden – Simply by acquiring a life insurance plan and paying the required premiums, you are also entitled to a number of life insurance tax benefits. The premiums you pay for a life insurance policy may be deducted from your total taxable income in accordance with section 80C of the Income Tax Act of 1961, subject to the clauses outlined therein. The most you may be reimbursed in a given fiscal year is Rs. 1.5 lakh.
But the tax advantages don’t end there. Section 10(10D) of the Income Tax Act, 1961, states that the nominees are totally tax-free when they receive the death benefit payment. Similar to this, subject to meeting the requirements outlined in section 10(10D), the maturity benefits you get at the conclusion of the insurance plan’s term are similarly tax-free. You can make use of a life insurance calculator to calculate the cost of your investments.
The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime. They are also subject to any changes in the law.
- Charitable giving – Have the earnings from your life insurance paid to your favourite charity so that when you pass away, you can leave a sizeable donation there. A charity may be designated as the beneficiary of a policy, its ownership may be transferred to a charity, the insurance proceeds may be donated by your estate, or a policy may be purchased on behalf of a charity. Different tax implications apply to each concept.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.