‘Life Insurance versus Other Savings’ (417 Words) | Is Life Insurance Policy better than other savings schemes? LIC explains – Top 5 reasons

Life Insurance versus Other Savings

Contract Of Insurance:
A contract of insurance is a contract of utmost good faith technically known as Berrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance.

At the time of taking a policy, a policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure, or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void.

Savings through life insurance guarantee full protection against the 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.

Aid To Thrift:
Life insurance encourages ‘thrift’. It allows long-term savings since payments can be made effortlessly because of the ‘easy installment’ facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half-yearly, or yearly).

For example, The Salary Saving Scheme popularly known as SSS provides a convenient method of paying premiums each month by deduction from one’s salary.

In this case, the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

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

Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force.

Assesses can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

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 the purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for the purchase of flats (subject to certain conditions).

Is Life Insurance Policy better than other savings schemes? LIC explains – Top 5 reasons

Here are the top five reasons why a life insurance policy may be a better savings option than other schemes:

  1. Death benefit: A life insurance policy provides a death benefit to the beneficiary in the event of the policyholder’s death. This can help to provide financial security and stability for the policyholder’s family during a difficult time.
  2. Tax benefits: Premiums paid on a life insurance policy are eligible for tax deductions under certain conditions, which can help to reduce the overall cost of the policy.
  3. Investment component: Some life insurance policies, such as whole life or universal life policies, have an investment component that allows the policyholder to build cash value over time. This can be a good way to save for the future and potentially earn higher returns than other savings options.
  4. Flexibility: Life insurance policies often offer a range of options and riders that allow policyholders to customize the policy to meet their specific needs and goals.
  5. Professional management: Insurance companies often have teams of financial professionals who manage the investment component of life insurance policies, which can help to ensure that the policy is being managed effectively.

It’s worth noting that life insurance is not the right choice for everyone, and it’s important to consider your specific needs and goals before deciding whether to purchase a policy. It may be helpful to speak with a financial professional or insurance agent to determine whether a life insurance policy is a good fit for you.

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