Most people are in need of Insurance nowadays as an assurance to manage risks of their life, properties or even health. The health costs associated when a person is hospitalized due to an accident or a body malfunction is also prompting many to revise their decision on having better insurance for their health. There are more health insurance seekers probably today in the world than for any other type of insurance. Such is the importance of dealing with health and the price tag that it comes with especially when it is seen lacking in an individual.The insurance policy is a contract where an insurer guarantees to pay the insured party a specified sum of the amount if one or more cited events occur in future in the life of the insured, in return for their regular periodic payments called premiums. Despite being one of the fastest developing countries in the world, India hardly holds even 10 percent of insurance coverage as unbelievably much of the population were still uneducated and unaware of the value in owning an insurance policy unlike in other developed nations in the world like the United States or the UK. Of all the insurance types, one must at least hold a life insurance policy as it is deemed to be the most crucial in significantly covering many of one’s living standard expenses especially if he/she happens to be the sole breadwinner in the family whose loss cannot be afforded by the family even monetarily.The life insurance coverage is essential even for the one who is well to do financially as it can still secure their family’s financial future because nobody can prophesy as to what the future holds.The benefits of having a life insurance coverage are multi fold versus only having a health insurance cover. While health insurance caters best to the aged, elderly and family segment, life insurance is ideal for the younger segment as they can enjoy better policy coverage benefits given their long-term lifespan in normal cases than the elderly group.One cannot overlook the benefits of a life insurance policy when compared to a health insurance policy as they are many and varied that cater to all income groups of people. However, despite the name ‘Health insurance policy’, there is no life cover which means there is no payout on death or any other death-like calamity like in case of life insurance. Before getting to know why life insurance is important, it is wise to look at its pros in comparison with the health insurance and then choose.
Life Insurance Vis-a-vis Health Insurance
Both life insurance and health insurance policies provide insurance coverage primarily, yet they are not similar to each other in many respects. While both play a significant role in covering the expenses in one’s life, the very purpose of these two insurance covers quite differ based on several financial benefits that are triggered on various occasions and times in a person’s life.Health Insurance, also known as Medical insurance are the same and provide health coverage in case of an eventuality where one gets ill and needs a major surgery/treatment/hospitalization. Life Insurance, on the other hand, only covers the eventuality of death or the demise of an individual where the sum assured goes to the Nominee, usually a dependent of the insured. The money would come in advantageous for the dependents in case of an untimely death of the insured. However, this is only a primary difference and premise for both types of insurances. The contrast, nevertheless, doesn’t end here as they are manifold as mentioned down under:Primarily, Health Insurance is typically avoided by the younger generation of 20- and 30- somethings as they choose to forgo health insurance altogether in relation to a life insurance.This is for the apparent reason that when compared to most other segments of the population, they have a much lower incidence of health problems and so rightly called by some health experts as “young invincibles.” These young guns consider paying a premium every month more for life insurance than for health insurance.With health insurance, there’s not enough choice as one has to obtain it anyway as they age and start having health problems but life cover is more useful for those who have kids or in other words dependents. Here one can exercise their choice if they want to as they may not need a life cover if they don’t have kids who depend on their income.There are more short-term and immediate monetary benefits in case of a health cover when compared to a life cover, and one can extend the benefits to his/her family or dependents also along with themselves. In the case of life insurance, only the prime nominee can claim a majority of the profit than the rest of the family members.Since life insurance policies are for a life term, one can opt for low premium policies possibly in their early 20s and pay without extra burden for as long as the plan continues which may not be that easy with a health insurance policy, particularly if the insured expects more health coverage with less premium.Though in case of a life insurance cover, ‘the more premium, the better advantage’ rule applies in many cases, this need not be true in case of a health insurance policy where there are basically four types of plans usually available and for many, the Silver plan is enough to cover the general medical expenses at large than a more expensive Gold or Platinum plans which include significant medical expenses unless when incurred.Deciding which life insurance plan to buy is all about one’s long-term planning and calculation of when and how they receive the benefits upon the completion of policy or their nominee when a calamity happens to the insured. With health insurance policies, short-term planning will suffice and serve the individual and their family’s health needs.Though in case of a life insurance cover, ‘the more premium the better advantage’ rule applies in many cases, this need not be true in case of a health insurance policy where there are basically four types of plans normally available and for many, the Silver plan is enough to cover the general medical expenses at large than a more expensive Gold or Platinum plans which cover major medical expenses unless when incurred.Deciding which life insurance plan to buy is all about one’s long-term planning and calculation of when and how they receive the benefits upon the completion of policy or their nominee when a calamity happens to the insured. With health insurance policies, short-term planning will suffice and serve the individual and their family’s health needs.While the young and healthy singles can do away mostly with just a life insurance policy, people who have dependents need to rely on both health and life covers as the benefits are so diverse for each of them that choosing one over the other becomes verily difficult.No matter the differences, the bottom line here is to buy the type of coverage one needs so that paying for both insurances at a time need not be that daunting for anyone who wishes to provide a safety net both for themselves and their family. Therefore, the truth is any insurance is better than no insurance at all, primarily if one has dependents and are feeling pinched from a financial standpoint, it is better to buy whatever policy premium one can afford.
Why Is Life Insurance Important?
It is important to discern the importance of a life insurance cover because of the main benefit that it provides than the side kick-offs. Though many people are yet to realize, buying life insurance is not just one more investment option but one of the most important financial decisions that one can make in their life. Not only financially, but it is also important otherwise that tells an individual how to care for their families in case of an unexpected emergency/calamity in their life. It could mean devastating consequences for their loved ones if they are unable to pay household and other expenses, debts and also maintain their standard of living with adequate finances.More than purchasing the policy as a future investment option to better one’s finances, it is always good to buy a life insurance policy keeping in view of securing their family’s financial future. Besides then, the added benefits of life insurance during one’s lifetime need not be overlooked especially if they are young. Given below are the best ten compelling reasons for one to opt for a life insurance policy:
1. Looking After The Loved Ones
This is the most critical aspect of life insurance that one needs to factor in. The familyis dependent on the insured even after they are gone and anyone certainly can’t let them down. Whether it’s paying back lost income, paying for the child’s education or making sure one’s spouse get the much-needed financial security, life insurance could save the day for one’s dependents who are survived after them.
2. Dealing With Debt
One doesn’t want their family to deal with financial guilt during a crisis. Any first-class debt – a home loan, personal loan, or a loan on credit cards – will be taken care of if one happens to buy an apt life insurance policy that can clear their debts.
3. Helps One Achieve Long-term Goals
Since it is an instrument that keeps one invested for the long term, it would help one achieve their long-term goals like buying a home or planning their retirement. It also provides with diverse investment options that come along with a variety of policies.
4. Life Insurance Supplements One’s Retirement Goals
Who wouldn’t like their retirement savings to last until they do? With a life insurance plan, one can ensure themselves of having a regular stream of income every month even post-retirement.
5. Buying Insurance Is Cheaper When Younger
Not every millennial need a life insurance policy. If one hasn’t created an emergency fund or are still living off their parents’ money, insurance shouldn’t be a priority.However, if one has dependents or have a co-signed loan with their parents (or any family member/friend), whether it be a student loan or a home loan, one needs to start thinking about buying a life insurance policy. Besides, coverage costs are much lower when one is single.
6. Insurance Takes Care Of One’s Business
Certain life insurance policies also take care of one’s business as well where the business partner can purchase a portion of the business without hassle. The business partner(s) will enter a buy-sell agreement and the payout would go to the expired partner’s nominees, without holding a stake in the company. There are two sorts of life insurance policies viz., a term insurance policy and a full life insurance policy.Term insurance protects for a definite period (10, 20 or 30 years) and pays out the rewards only if the policyholder dies during the term. The policy will lapse, and coverage will end if one outlives their policy. Contradistinction, an investment-cum-protection plan offers one a lump sum amount on the completion of the policy term. These plans also provide protection but the cover is usually not quite high as offered with term plans.
7. Tax-saving Purposes
Saving taxes with insurance policies is possible irrespective of any plan one purchases. The premium one pays for an insurance policy is entitled to a maximum tax benefit of Rs 1.5 lakh under Section 80C and for tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.
8. A Tool For Involuntary Savings
If one has chosen a traditional or unit-linked policy, they can pay a premium each month higher than what it costs to insure them. This extra bit of money is invested which accrues cash value. This cash can later be borrowed against the policy, or one may choose to sell it or derive income from it.
9. One May Not Be Qualified For It Later
Life insurance policies are precarious. Because one is healthy today, paying a premium for a plan may feel like adding a financial burden, but if one suddenly fall ill tomorrow, they may not qualify to buy a life insurance policy. Hence it is wise to buy one early on in one’s life as it remains in force if their health worsens later on. Insurance companies allow one to attach some riders like death rider or benefits to an existing/new policy.
10. Securing Peace Of Mind
In the face of an inevitable calamity like death, the least one can do for the family is to secure their financial future. Even with a small policy, one can do a lot to help their family members sail at peace during turbulent times.Nonetheless, Life insurance is an excellent tool for both protection and aiding a consumer to have financial discipline by saving for the future, which leads to the creation of a functional corpus. The need for life insurance changes at different stages in one’s life cycle depending on their financial commitments and dependencies.
