'Insurance is much more than only income tax benefits'2 min read . Updated: 17 Oct 2020, 06:48 AM IST
Life Insurance offers wide range of solutions that can come in handy to meet one’s financial goals such as child’s education, marriage, future financial goals, retirement or for protecting against loss of assets.
By Anil Kumar Singh
Over the years, life insurance has emerged as one of the many tax-saving instruments that people prefer. Many of us have purchased our first life insurance policy, only to save tax. While, this financial instrument acts as a rewarding tax shelter, one must not forget that the main objective of a life insurance policy is to provide financial protection to an individual and his/her family, in the face of uncertainties.
There are host of life insurance plans available in the market today, catering to various financial needs of an individual. Besides, financially protecting one’s family in their absence, life insurance acts as a risk protection vehicle, as well as means to save and grow money. Life Insurance offers wide range of solutions that can come in handy to meet one’s financial goals such as child’s education, marriage, future financial goals, retirement or for protecting against loss of assets. Many life Insurance policies offer guaranteed return on investments while, some are designed to provide much needed finances against the risk of various illnesses such as cancer, heart, renal etc.
It is evident that life insurance policies are not only about tax saving or death benefit alone, but they are about long-term survival as well. They are a reliable financial instrument which one can opt for to build a corpus for various future money needs.
Even today, many individuals purchase life insurance plans primarily as a tax-saving product, without evaluating its features or understanding the benefits such a plan can offer. Like any other important purchase, one must be extremely prudent while purchasing a life insurance policy, too. As a rule of thumb, it is always advisable to choose a financial option that offers the mutual benefits of wealth protection, flexibility, value appreciation, and tax savings. A life insurance plan does it all. To select the appropriate insurance policy, it is important to map it with one’s individual profile. Also, it is important to make note that the main purpose of a life insurance plan is to act as an income replacement tool. Therefore, if the sum assured is too small, it might not suffice the future financial requirements of your loved ones. It is thereby wise to consider various factors such as age, income, liabilities, age of retirement etc. before arriving at the adequate sum insured value.
It is a myth that life insurance provides only tax benefits, conversely; it is much more than that.
(The author is Chief Actuarial Officer, Aditya Birla Sun Life Insurance. Views are his own.)