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Life insurance provides a safety net—protecting your loved ones and offering you peace of mind. Despite its importance, life insurance coverage in India declined to just 2.8% in FY2024, primarily due to cost concerns, lack of awareness, and limited understanding of insurance products.
Now, it’s time to change that. With the right support and guidance, life insurance can be a simple yet powerful way to secure what matters most—your family’s future.
Here are a few reasons why you should consider buying adequate life insurance:
Protects the family from financial losses
The death of a breadwinner can be a devastating blow for most families. While the emotional loss cannot be compensated, adequate life insurance cover can help the family tide over the resulting financial strain. If your family includes non-earning members, such as children and elderly parents, who depend on you financially, purchasing adequate life insurance must be a priority. Term life insurance is a simple product that provides a large cover for a relatively small premium. The payout from the life insurance company, in the event of untimely death of the breadwinner, can help cover the living expenses of the surviving family members.
Covers loans and liabilities
Buying life insurance is a must if you have large outstanding loans. Purchasing a home in a metro city is a task, and many first-time home buyers need a home loan to fund the biggest purchase of their lives. These home loans often need to be paid over a long period– say 15-20 years. If the borrower passes away before paying the home loan and there is no way to clear the loan, the bank has the right to take possession of the property. In such a scenario, the family may lose their claim on the house due to non-payment of the loan.
In the case of joint home loans, it is important that both borrowers have adequate life insurance cover. This ensures that, in unfortunate event of borrower’s death before repayment of loan, the surviving family can continue living in the home without financial strain.
Pays for financial goals
Life insurance can also be used to fund specific financial goals. For example, a traditional life insurance policy or a unit linked insurance plan (ULIP) in the name of the child can be used to create an education fund for the child. Annuity products can be used to generate regular income in golden years.
Effective financial planning requires a mix of traditional and market-linked investment products, with built-in protection. Using life insurance judiciously ensures that your family’s financial goals are met -- even if you are not around.
Supports long-term financial planning
In addition to helping to achieve short- and medium-term financial goals, life insurance can be instrumental in passing on wealth to the next generation. Whole life policies can be used to hand over a corpus to the surviving family members. Some annuity products ‘with return of purchase price’s features can come in handy to address specific financial needs of the family.
Peace of mind
Effective use of life insurance products in your financial plan can help you achieve multiple financial goals. It also helps reduce stress for most individuals. With a strong protection plan in place, you can focus on your job or business without constantly worrying about the future.
Tax benefits
Changes in income tax laws over the last few years have led many individuals to opt for the new tax regime. As a result, the deduction-driven investment approach has less takers. However, life insurance still scores high on tax front. Proceeds from life insurance policies are tax-exempt under section 10 (10D) of the Income Tax Act, subject to certain conditions. This benefit makes life insurance policies - especially traditional ones - more attractive compared to other interest-paying investment options.
Customized low-cost solutions
Life insurance products are now easily accessible through digital means. They can be tailored to serve specific needs. Policy tenure, sum assured, and premium payment frequency can be modified to suit the cash flow requirements of an individual. Many life insurance products also offer additional benefits, known as riders, which can enhance protection. Importantly, premiums have become more affordable over time, and monthly payment options using digital means have made life insurance policies accessible to most of us.
These are some of the reasons why you should consider purchasing adequate life insurance. Even if you already have bought a life insurance policy, it is important to review its details. Many times, old policies have a relatively small sum assured, which may become inadequate for the life assured as the life assured grows in her career and her responsibilities increase. Life insurance needs should be reassessed regularly in the context of rising income and evolving family aspirations. Usually, it helps to buy life insurance early, as premiums tend to rise with age. Buy the right cover - now!
