Is Life Insurance Policy better than other savings schemes?

 

Is Life Insurance Policy better than other savings schemes? 

Life insurance is a contract that assures payment of an amount to the person assured (or his nominee) on the happening of the event insured against. Life insurance also eliminates 'risk', substitutes certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner.

However, despite the benefits provided by a life insurance policy to the family or nominee of the policyholder, some may think that a life insurance policy is not an effective savings instrument.

Against this backdrop, Life Insurance of India (LIC), India’s largest life insurance company, has come out with top five reasons explaining why a life insurance policy is better than other savings instruments. Here are the details.

Protection

Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Savings

Life insurance encourages 'thrift'. It allows long-term savings as payments can be made effortlessly because of the 'easy instalment' facility (monthly, quarterly, half yearly or yearly) built into the scheme. 

Liquidity

In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value.  A life insurance policy is also generally accepted as security, even for a commercial loan.

Tax relief

Life Insurance policy allows policyholder to avail tax deductions on income tax and wealth tax on the premium amounts. However, one should note that tax benefits are subject to the income tax rates in force.

by Taboola

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Money when you need it

A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies.

Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).