Today I am going to discuss about life insurance. Life Insurance is something which is very important in life. Before independence, hundreds of companies were running insurance business but after independence government merged all the companies into just one entity called Life Insurance Corporation of India.https://licindia.in/
Very few people know that at the time of independence,there were 300 companies offering life insurance services but after independence, government took over all the companies and merged them together to make a single company called Life Insurance Corportation of India.
It was the only company in life insurance sector till 2000 when life insurance sector was opened for private players to insure healthy competetion and more choice for the customers. There are 23 private life insurance companies in India like HDFC Life https://www.hdfclife.com/, ICICI Prudential Life Insurance https://www.iciciprulife.com/ Bajaj Allianz Life insurancehttps://www.bajajallianz.com/ and many more.
People believe life insurance is not important because its returns are not enough. Many people, even if they have insurance have very less compared to their income. Insurance should be bought for the purpose of insuring lives. Adequate cover should be bought so that if the person is no more his income should be replicated.
Life Insurance is of 2 types -term plan and endowment plan.
People think that who will block money for 20,25 years? Instead, let’s get ourselves some endowment plans. And on the other hand, they say the return is very less.
People should understand that life is much more important and insurance is the first step in investing. If you don’t invest in your family, who else will?
Daily in India, hundreds of accidents are reported. But still people think “Mere saath nahi hoga”. People should come out of their illusion and understand that anything can happen to any person. People should learn from others mistakes. It is not possible to make mistakes and learn . Life is too short for that.
I want to share my experience with you. It was 2011 and I was riding my father’s bike. I had not gone too far from my home and I was overtaking a truck. Trucks and big vehicles keep moving because my home in Bokaro is on a national highway.
In the blink of of an eye, before I could understand anything ,I had an accident and when I opened my eyes I realized the date and place has changed. I was in ICU and date was the next day. My body had injections in six places. And everybody was asking what happened. I was trying to recall how the accident happened and when I felt unconscious.
I just remembered the crash but I had never dreamt even in my wildest dream that an accident of this sort would happen to me. For five years I did not touch any bike after that day. The accident happened on a Pulsar and till date I do not have the courage to buy a bike having disc brakes.
When I was in hospital doctors told me I had internal bleeding. It took me 8 months to recover.
I just want to say that people should understand the value of their life. In my first article, I spoke about financial freedomhttps://sidworld.in/5-ideas-for-financial-freedom/. Insurance is the first step of insuring your family.
People take so many steps to ensure the families well being. Some take home loan some take car loan. Everyone has some sort of liability.
If they buy insurance at least they can be assured that in their absence their family will not have any burden. Or obligation to pay any dues. For this they should take term insurance. It is relatively cheap compared to traditional plans. For 10000, you can get 25 lac cover from LIC and 1 crore from private insurers.
So the first reason for taking life insurance is safety for the family .Insurance should be taken because every person has many commitments towards his family . Insurance provides a cover that in case any unfortunate event like death of the breadearner happens,the family gets total sum assured to the nominee so that some help can be provided. Larger the premium , larger is the sum assured . So, a person should always aim for higher cover .
The second reason is tax saving . The government also gives tax benefits under section 80 C upto 150000 . Simply put, your investments in life insurance of Rs 150000 will not be taxable.https://www.incometaxindia.gov.in/Pages/tools/deduction-under-section-80c.aspx
The returns which you get in insurance is also not taxed compared to fixed deposits ,where the returns are taxed.
The third reason for taking life insurance is that it helps in achieving long term goals .Goals like retirement or saving for child’s education, their marriage requires a lot of money after factoring in inflation.https://economictimes.indiatimes.com/definition/inflation In that aspect life insurance helps in achieving a lot of goals because there are many plans from different life insurance companies which provide good plans keeping these goals in mind.
The fourth advantage of taking insurance is that it helps in retirement planning https://www.franklintempletonindia.com/investor-education/planning-for-retirement/article/head-start-15/what-is-the-importance-of-retirement-planning . Life insurance are generally of long duration . Some even extend upto 35 years . So if a person takes a insurance policy in his early years, he can get a larger life cover at a cheaper premium because premium generally increases with age.
So at retirement , he can get a good amount through life insurance if the policy is of big amount and larger duration.
The fifth reason of investing in life insurance is safety of investment . A life insurance company is always profitable and all the insurance companies in India work under the strict rules of IRDAI https://www.irdai.gov.in/,the government regulator for life insurance . So the public is also assured that their investments are in safe hands.
There is also some ambiguity in the people’s mind about private company and government company called LIC .But all the companies work under the same guidance of IRDAI and there is no difference in private insurers and Life Insurance Company of India.
Please comment below if you have any suggestions how this article can be improved.