A wise financial strategy includes purchasing best life insurance in Ontario. AS it can protect your loved ones from financial hardships in case of an unfavourable event. Additionally, certain types of insurance plans give you the means to maintain your financial security in the future. Thus, life insurance is a crucial financial instrument in your toolbox.
A life insurance premium calculator is recommended for comparing the premium estimates of various policies before buying one. Following is a summary of how life insurance safeguards your financial future.
How life insurance provides financial protection
1) It acts as a substitute for other sources of income
Your income supports your family’s livelihood and long-term aspirations. They can lose such financial support in the event of an unfavourable incident. As the family’s primary salary earner, you must make plans for alternative funding sources for current and future costs. Life Insurance plans are legal contracts in which you promise to pay a set amount annually. In exchange, the insurance will provide your family members with a certain payout in the event of an emergency to make up for lost income.
2) Saves from debts
Suppose you owe money on debts like a home mortgage, car EMIs or credit card payments. After your untimely demise, your family will have to pay this debt. Your policy settlement amount will help them pay off these loans. This case acts as a great example of the benefits of life insurance.
3) Covers the expense of children’s education
Children’s security is the parents’ top priority. In your absence, your life insurance plan can pay for your children’s college expenses, marriage and other important life events.
4) Creates funds for long-term life goals
You can build wealth by optimally utilising the benefits of life insurance policies that offer savings options. The goal of buying a home, or creating a retirement corpus, can be financed with the maturity amount. For instance, money-back term insurance offers a nest egg after the policy period. It can be used to purchase an annuity as a secondary source of income.
5) Decreases your income tax* expense
When you start earning, you are obligated to pay income tax. This tax liability can be a burden if not planned correctly. *If you have opted for the old tax regime, then under Section 80C of the Income Tax Act, you may deduct the cost of your life insurance premiums from your taxable income. This option is unavailable in the new tax regime.
6) Acts as a safety net in unexpected situations
Most insurers offer riders, with your regular life insurance, at little extra expense. In the event of a fatal accident, an accident rider gives your family additional payments. Suppose you are diagnosed with a life-threatening medical condition. Then a critical illness rider gives you a lump-sum amount which you can use to pay for medical care.
These are ways life insurance plans enable you to be ready for the unforeseen future.
How to ensure that your life insurance coverage is an effective protection plan?
Choose sufficient insurance cover to effectively provide for your family’s current and future financial needs. Life insurance premiums should be affordable because unpaid premiums nullify insurance. Term insurance covers all these aspects. To guarantee your family’s needs are met, consider the following while buying insurance:
- Your annual income: Life insurance replaces income. Multiply your yearly salary by 10 or 15 to determine an acceptable cover level, say financial experts.
- Your family’s lifestyle costs: Consider your current total household expenses. Multiply it by the number of years for which your family requires financial support to get the amount necessary to support your family.
- Coverage duration: Your insurance payout should support your family till they can become financially independent. A common choice for the policy duration is the number of years till retirement or the conclusion of the children’s education. If you will have dependents after retirement, choose full life cover.
- Possible future costs: Your family’s future demands include children’s education, their marriage, your spouse’s retirement, and unforeseen emergency. Also helpful are policies that allow coverage to grow with budgetary needs.
- Inflation: Consider historical inflation to anticipate future expenses to maintain your family’s current standard of living.
Why buy a term with maturity benefit?
Traditional term plans do not usually provide a maturity amount if you outlive the insurance. Thus, a term plan with a return of premium option is desirable. The premium is returned at maturity if no unpleasant event occurs during the policy period.
Term plans support your family’s future and meet their financial demands. Knowing your money won’t be wasted brings the comfort of mind. You can use returned premiums as income or for big-ticket expenses.
Even if you already have investment-linked insurance, you can still consider term plans for additional coverage. Use a life insurance premium calculator to compare the premium estimates of different insurance plans for the right financial security.