Things you didn’t know about Life Insurance
- On the surface, a Life Insurance seems quite straightforward. An insurance company will receive premiums from the policyholder and in exchange, they will choose to pay out a death benefit to the policyholder’s beneficiaries. However, most life insurance plans can be a lot more complex than this. People fail to realise that there are a lot more options and types of life insurance policies out there that have perks and can be used to one’s advantage.
- Here are a few things you didn’t know about Life Insurance:
- 1. Income source in your time of need
- A policyholder need not have to pass away to receive their death benefit early from their Life Insurance policy. In fact, this is a common life insurance myth. The fact is that many plans offer critical illness riders that can pay out funds in case someone were to become disabled, experience a heart attack, suffer from an invasive form of cancer, stroke, or more such things. Hence, Life Insurance plans can provide an important safety net for those who are unable to work or have mounting medical bills. For these reasons, it is recommended that one use these funds while a person is alive, rather than using them solely as a death benefit.
- 2. A personal pension plan
- Some financial advisors recommend that one can treat a Life Insurance as one’s own personal pension plan. In fact, there exist many retirement-oriented Life Insurance plans. These are pension plans, ULIPs, endowment plans etc. To add to this, Life Insurance is very tax-friendly in India, making it an attractive means of lowering one’s tax burden, both prior to and during one’s retirement.
- 3. Waiver premiums by adding a rider
- Did you know that you have the option of premium waive riders that come with multiple policies? It is these provisions that often help those who are disabled keep their coverage, without continuing to pay premiums. As suggested in the name itself, this kind of rider eliminates the need to pay premiums for those who have a qualifying illness or injury. Similar to living benefits afforded to policyholders by some Life Insurance policies, premium waivers are rarely utilised but are incredibly useful.
- 4. Maturity Payout
- One of the biggest Life Insurance myths is that the company will not return your premiums if you survive your policy’s term. This may be true for some policies but not all. In fact, you can opt for the return of all your premiums if you reach the Life Insurance policy’s end and never make a claim. You will be required to pay extra money for the return of your premium rider. However, without being aware of this feature, some people may let go of all of their invested premiums when they could have had it returned to them. Many policies naturally offer a maturity payout in the form of the Sum Assured which is secured to the policyholder, if they survive the policy term.
- 5. Can be utilised as collateral
- A Life Insurance fun fact that you probably weren’t aware of, is that depending upon the policy, one can use their Life Insurance as a collateral to secure a loan. Besides term insurance plans, this feature tends to apply to all other Life Insurance plans. To explain this simply, a plan that comes with a maturity benefit can also be used as a collateral if one wishes to borrow funds, thereby offering you financial flexibility when you are in need of it the most. Hence, if you are desperately seeking to take a loan, you can use your Sum Assured as a collateral for the same.
- 6. Tax-Free Source of Income
- A whole Life Insurance plan that builds up a cash value over a time period can serve as a tax-favored repository of funds that can be utilised by you in your time of need. This cash value can be used for nearly any financial requirement you might have, whether it is to fund your children’s education or to pay for a vacation. This cash value is also completely tax-free since it is not considered to be a profit.
- The truth about Life Insurance is that it is more than just a financial security for your loved ones, in case you are not around. This Life Insurance myth needs to be busted so more people can discover Life Insurance plans worth putting their money into. Some other Life Insurance fun facts are that it can serve as a loan collateral, become a tax-free income source and aid your retirement goals. You also have the flexibility to waive off your premiums in case of an accidental disability or illness.
Source: ICICI Bank