What are the Benefits of Life Insurance Policy?

What are the benefits of life insurance policy?

The benefits of a life insurance policy are multi-dimensional.

It protects the financial interest of your dependents in case of your premature demise, in form a lump sum pay-out (death benefit).

It also offers:

Maturity benefits – Life insurance policies such as endowment and money back policies pay a lump sum at the end of the policy term, thus helping you build a corpus for various financial goals.
Tax sops – The premiums you pay for your insurance policy are eligible for tax deductions under section 80C.
Loan facility – Endowment and money-back policies have a surrender value because of which you can use them as collateral for a loan.
Periodic Pay-outs – Life insurance policies, such as money-back plans offer periodic pay-outs at distinct intervals.
Assured income - Certain life insurance policies offer staggered payments in case you, the policyholder, suffer from a partial disability.

Do all life insurance policies offer the above benefits?
No, it depends on the type of the policy. Pure term insurance policies don’t offer any maturity benefits. Also, you can’t use term insurance as a collateral for a loan since it doesn’t have a surrender value.

When should I buy a life insurance policy?
Ideally, you should purchase a life insurance policy as early as possible, when you start earning. When you buy an insurance policy early, you can avail low premiums with a high coverage. Premiums go up with age.