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Here’s Why Life Insurance Must be Looked at Beyond Tax-saving

Life comes with its share of ups and downs. It’s the reason why physical, emotional, and financial stability is important; it equips us better in times of uncertainty.

Although unforeseen circumstances can’t be predicted or controlled, we can ensure that we build a safety net around us, in case the breadwinners of our families find themselves in exigencies, or pass on. One of the most effective ways to tackle this situation is to opt for a life insurance cover.

Though life insurance is a bankable tool that offers financial protection, often it is reduced to only a tax-saving instrument. As the end of a financial year approaches, many last-minute tax savers rush to purchase life insurance. While it is among the most popular saving schemes that allows for tax deduction under Section 80c of the Indian Income Tax Act, just opting for life insurance with this purpose in mind is a flawed approach.

A life insurance policy should be purchased with the objective of financial planning and protection in the event of an unfortunate occurrence like the death of an earning family member. Term insurance is a relatively risk-free asset compared to other financial investments like equities. However, it is important to select the right term policy. Before we move on to that, let’s first understand its benefits beyond simply saving taxes.

1. Financial security: The most reassuring feature of a life insurance policy is that it takes care of the dependents of a family, in case of any tragic event. Not only does it provide financial security during a medical crisis, but it also offers a safety net in case of any kind of emergency.

But often, when buying hurriedly to save taxes, people miss out on the larger picture and do not keep in mind the actual insurance needed for their dependents. Being underinsured can hurt, as it may prove to be insufficient for those left behind after the demise of the breadwinner.

2. Wealth creation: Some life insurance policies also invest the premium across various investment channels to help you get superior risk-adjusted returns. Besides, it also helps in creating a balanced financial portfolio by taking care of liabilities, such as loans. They can be paid without the risk of the family losing their assets. It also proves to be an aid when planning for your children’s education, marriage or even retirement planning.

However, it’s important not to purchase multiple policies in panic. You will land up paying a higher premium, which will reduce your savings.

Which life insurance plan must you zero in on?

Although there is a sea of options available today, it’s difficult to find one that can cover all the bases efficiently. Term insurance is a simple protection plan that offers high insurance cover with an affordable premium. Hence, to help customers save time, effort, and the confusion of scrolling through hundreds of policies, HDFC Life has introduced a new plan that ticks all the right boxes.

HDFC Life Click 2 Protect is the perfect hedge, should things go awry. It is an intelligent term insurance plan that serves the needs of all policyholders, and at the same time, protects the family against any uncertainty.

Why Click 2 Protect?

HDFC Life Click 2 Protect plan offers customers an option to avail cover for their entire lifetime. It also ensures a steady stream of income even post-retirement by offering income payouts, age 60 onwards. Moreover, you also get the option to reduce Premium Payment Terms from a regular pay to limited pay.

It also offers a waiver in premium, in case of critical illness. Other than regular tax benefits as per the existing laws, policyholders also get back all the premiums paid on survival until maturity -- this is applicable in case of return of premium options.

The policy also offers multiple benefits, if you opt for riders with your insurance. There are additional income benefits other than the sum assured, in case of total permanent disability after an accident. There’s also a lump sum amount that is offered upfront, which is equal to the rider sum assured, in case the policyholder is diagnosed with any of the specified critical illnesses.

What are the different kinds of insurance covers?

Before choosing the insurance policy, it is important to be clear about your objective. There are several options available within a policy, so you must zero in on the one that suits you the most.

The basic life cover includes a one-time lump sum payment option, in case of the demise of the policyholder. You can either choose a term cover for a limited tenure or for your entire life. Policyholders can reduce the premium payment frequency during the term of the policy.

The life illness + critical illness option offers a certain sum assured in case the policyholder is diagnosed with an ailment from a list of specified critical illnesses.

Besides the one-time lump sum payment given upon the demise of the holder, this plan also offers a percentage of the total cover amount as lump sum amount. You also get a waiver on all future premiums, upon diagnosis of these illnesses.

The third plan is life cover + regular income. Under this policy, you can get a life cover for the chosen policy term and regular monthly income, age 60 onward, as well as a lump sum amount on maturity.

HDFC Life Click 2 Protect offers the above mentioned plans, providing you with the flexibility to choose what works best for you. It is advised that you seek the help of a professional to check your eligibility criteria, and then choose a life insurance plan.

The last word

No one knows what the future holds, but life insurance often serves as a much-need financial balm in case tragedy strikes. It’s exactly why we need to put some thought into this investment instead of making the common mistake of looking at it as a quick-fix to save taxes.

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Printable version | Jan 28, 2022 9:52:05 PM | https://www.thehindu.com/brandhub/heres-why-life-insurance-must-be-looked-at-beyond-tax-saving/article37682678.ece

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