Why Life Insurance?

Despite being life’s most permanent reality, death continues to be a difficult conversation. Likewise, despite being a crucial aspect of life, life insurance is not something that people like to consider buying. No one wants to think of a situation which involves either of these. However, if the idea of leaving your dependents in a financial catastrophe scares you, life insurance should be a high priority.  

As the name suggests, life insurance is a contract between the policyholder and the insurance company wherein the policyholder’s life is covered against any kind of mishap that may result in the premature death of the party insured. In other words, if the policyholder, unfortunately, dies during the policy term, the insurance company is required to pay a pre-decided amount of money to his or her survivors according to terms agreed upon between the policyholder and the insurer. So, it could be one lump sum payment. 

Deciding Human Life Value and Adequate Sum Assured 

While life insurance financially covers your family in your absence, it is natural to ponder over the amount of that cover. The concept of human life value is crucial to decide the right sum insured. Unlike the common notion, it is not just a calculated basis of the financial value that one adds to the household. Rather, it is a calculative assessment of that value and the financial liabilities that one needs to take care of in one's lifetime. Apart from this, factors like changes in lifestyle, income and inflation rate are also taken into consideration before concluding the right amount.  

Why Life Insurance is the Most Important Part of your Financial Planning 

Safeguards Your Family 

The first thing a life insurance policy does is to free you from the concern about what will happen to your family in your absence. A life cover does this by ensuring that there is a constant stream of cash flow, even in your absence.  

Life insurance gives your loved ones the power to be self-reliant and independent. That means your family does not have to compromise with their lifestyle. The payout they receive as part of the life insurance policy can be used for monthly expenses or critical life goals, such as educating children. 

Protects Assets 

Everyone wants to give only the best life to their families. Even if it means taking loans, so be it. If everything goes as per plan, you would be able to pay back the loans in time. However, what if things take a turn for the worse and something unfortunate happens? It becomes a matter of concern if you are not around to pay those EMIs. Then those comforts can turn into liabilities with debt looming large on the family. However, with life insurance with the right cover, you need not worry about this as your assets would be protected. All you need to do is to take your liabilities into account while deciding the sum assured and if something happens to you, the payout received by the family can be used to pay off the debt. 

Builds Wealth 

Life insurance is the very foundation of any sound financial plan. With the right kind of policy and the right sum insured, one can plan and build the future of their family without worrying about whether they would be present in person to witness it or not. A death, especially of an income-earning member of the family, can cause a major setback to their financial well-being if a sufficient life cover is not taken.