Reasons You Should Buy Life Insurance Sooner Rather Than Later
Life is unpredictable and you never know what life will serve you in the future. It sometimes may be harsh and might serve you with the worst for which you might need financial planning. In such a situation, a LIC policy is something that can solve all your financial solutions.
What is Life Insurance Policy?
A Life insurance policy is a form of financial protection against unknown risks. It is a contract in which the insurance company guarantees to pay your beneficiaries a certain amount at the time of your sudden death. All you have to do is, pay the regular periodic payments, also known as premiums.
Evolution of LIC
The LIC was formed in 1956, under the Life Insurance of India Act. Since then the LIC Corporation is the biggest insurer in India. The corporation offers insurance plans for both individuals and employee groups. LIC now has 2048 fully computerized branch offices, 8 zonal offices, 113 divisional offices, 2,048 branches, and 1408 satellite offices, as well as the Central Office. Also, it has 73 client zones and 25 metro-area service hubs throughout India.
How does it work?
Before getting deeper into the benefits of life insurance plans, let us deep dive into how the LIC operates. Well, it is quite simple to understand through the following aspects.
Contract
When you buy a life insurance policy, LIC issues a contract that gives financial assurance also known as “Death Benefit” to your dependents in case of your sudden death. The company undertakes extensive background checks, and any information concealed in error would be considered a breach of the insurance contract. If no information was falsified, LIC takes the risk of your death.
Premiums
The insurer is responsible to pay the sum of money to the insured policyholders' beneficiaries upon his or her death. While the policy owner or insured agrees to make payments in monthly or yearly regular intervals or lump sums. It is important to pay these regular LIC premium payments to the company in order to have the death benefit.
The premiums charged are proportional to the policyholder's death risk and the sum assured. Premiums typically rise with age and vary according to the insured's lifestyle. It should be noted that if premium payments are not continued, the policy will lapse.
Investments
LIC pools all premiums and invests at least 75% of them in government securities. This ensures that policyholders’ money is safe while also earning additional returns. The remainder of the premium capital is invested in market-linked stocks, equities, and corporate bonds. The return on investments is how the company makes money and pays out death and maturity claims.
It is important to note that the death and maturity benefit amounts are fixed at the time of policy is issued. Under certain plans, LIC also provides loan benefits to its customers, which the policyholder is required to repay with interest.
Settlement of Claims
The major aspect of LIC’s operation is claim settlement. It is bound to pay a large number of claims in an easy year. The funds generated by the collective investments are now used by LIC to settle the claim amount.
LIC sells insurance through its extensive distribution network, which includes individual agents, branch offices, and bancassurance partnerships. It has partnered with over 40 of India's leading banks to promote its life insurance policies.
Now that you know how LIC manages its operations, let us understand the reasons LIC is a thing for you.
Reasons you should buy LIC Plan
Well, there are multiple reasons you should buy a LIC plan. While LIC is not something that is specific to a group of people, anyone can buy a LIC scheme. But, the fact that you should purchase a plan sooner in your thirties is true, as during that period the plans are affordable meaning lower premiums.
Also, for most adults, whether single, married, with children or without, in great health, or with serious health issues, life insurance is a necessary purchase.
Further, we will learn the benefits LIC plans have to offer you.
Replace income for dependents
Life insurance is a sort of replacement income for your family members, especially in case you are the breadwinner for your family. The claim received after the insuree dies can be used to cover daily expenses as well as Life insurance can also act as a buffer, giving your family time to develop a new, long-term financial plan that reflects their current situation.
Pay off your debts
Debt coverage is one of the significant reasons to buy a life insurance plan, to be specific, term insurance, to cover the debt. If you have a mortgage, auto loan, student loan, or large credit card debt, a life insurance policy will protect your loved ones from inheriting the burden.
If you own a business or require a loan
Individuals can borrow money against their insurance policies, which they might utilize for personal or business purposes. The LIC Insurance Policy serves as security for the loan. If the policy expires without the loan being returned, any outstanding loan amount will be removed from the maturity benefit. In the event of the policyholder's death, the death benefit is paid after the loan amount has been deducted.
Tax-free benefit
Every penny you give, your beneficiaries will be able to enjoy. This is due to the fact that the benefit of a life insurance policy is normally tax-free.
What Plan is Ideal for you?
Everyone needs some form of life insurance, but you need to decide if it’s better for you in the long or short term.
Short-term policies tend to be cheaper and are most suitable if your family has financial support from another source.
If you rely on your salary, then long-term plans are more beneficial as they can be built up over time. However, these types of policies are more expensive and may not suit everyone. For example, if you have a mortgage that is greater than 25% of your income, then it might not be worth paying extra for a longer policy because there will be little difference in a payout when you pass away.
It’s best to get advice from top life insurance companies before making any decisions. They should be able to help you weigh up all your options and make sure you buy a plan that suits your individual circumstances.
Conclusion
Life insurance is a one-time purchase that can make all of your future financial goals more achievable. As you go through each stage of life, determining what insurance coverage you need gets increasingly complicated. At every step in your life, however, your needs will be unique. Achieve financial stability with LIC today. Don’t wait until it’s too late; get started today!