Life insurance for young families: Why it’s important

With a life insurance policy, you can secure your loved ones now and ensure their financial security and well-being in your absence.

Life insurance is a key pillar in safeguarding the financial security of young families. With guaranteed life cover, long-term financial protection and affordability, it is a much-needed tool for all young families. 

As your family expands, so do the responsibilities. In the event of your absence, your spouse and children will rely on the financial legacy you leave behind. Balancing multiple financial goals, simultaneously can be daunting, especially if you are trying to secure a substantial sum for your loved ones. 

Fortunately, life insurance plans offer a simplified solution and provide you with the means to safeguard your family's interests and future prosperity. 

Why is it important for young families to buy life insurance?

1. It helps you accumulate a large sum of money

Young couples often find themselves with limited savings as they are just starting out in their careers and may still be in junior positions. With multiple financial objectives, such as saving for a house and planning for retirement, creating a contingency fund to support their loved ones in the event of their absence can seem daunting. 

However, a life insurance policy presents a solution. It offers a high sum assured that is given to the nominee in the unfortunate event of the policyholder's demise. With life insurance, you can secure a life cover as high as ₹ 1 crore or more at a relatively low premium to ensure financial security for the family's future.

2. It helps protect your loved ones from debt

As stated in the previous point, young families often juggle multiple aspirations, such as purchasing a home. However, securing a home loan can be a significant financial commitment and may require years to repay. In the unfortunate event of a tragedy, the burden of this loan can shift to surviving family members. 

Coping with the loss of a loved one is challenging enough, and adding financial strain can further intensify the situation. Moreover, failure to meet loan obligations could result in the loss of the family's home.

Life insurance payouts can enable families to settle debts and preserve their assets. With flexible payout options, families can either pay the loan as a lump sum or according to the original repayment schedule.

3. It acts as an income replacement

Even without loans, the loss of a loved one can disrupt household income and significantly impact a family’s standard of living. It may also necessitate cutbacks on essential expenses. Many families find themselves compelled to downsize to cope with the reduced income resulting from the absence of a breadwinner. 

Life insurance plans offer regular income options that can complement the policyholder's earnings. This supplementary income can be used to cover various expenses such as groceries, rent, utilities, travel and more to ensure continuity in the surviving family’s daily life without any unwanted disruptions.

4. It provides joint protection

Life insurance in India often provides the flexibility to purchase a joint life cover that offers protection for both spouses. In the unfortunate event of the first spouse's passing, the surviving spouse receives the life cover benefits. If both spouses are absent, the coverage extends to the children. 

Joint life cover can be a convenient and smart way for young families to cater to their life insurance needs. 

5. It protects against several diverse situations

Life insurance provides comprehensive protection against various unforeseen circumstances with additional benefits that can be added to your policy to tackle diverse situations. 

For instance, term life insurance can be paired with riders like accidental death benefit, which provides an extra sum assured in the event of accidental death. Critical illness and terminal illness riders offer financial support during health emergencies. The critical illness rider provides coverage for specified critical illnesses and helps eliminate the financial burden associated with treatments. Similarly, the terminal illness rider offers a lump sum payout upon diagnosis of a terminal disease for peace of mind during difficult times. Additionally, the permanent disability rider is designed to waive future premiums in the event of a permanent disability. This can ensure continued coverage despite unforeseen circumstances. 

These additional benefits ensure that young families are safeguarded against a wide range of potential financial adversities.

6. It offers tax benefits

Another great reason to buy life insurance as a young family is to maximise your savings. Life insurance not only secures your future but also offers tax-saving benefits to boost your present savings. The premiums paid towards a life insurance policy are eligible for a tax deduction under Section 80C of The Income Tax Act, 1961. This allows you to reduce your taxable income each year you pay the premium. 

Furthermore, the death benefit provided to your family is tax-free under Section 10(10D). Additionally, if your policy includes health riders, you can claim further benefits under Section 80D. 

To sum it up

For most young people, the very thought of potential financial adversity often takes a backseat. However, life's unpredictability does not discriminate based on age. Tragedies can strike at any moment, which is why safeguarding your family's future as early as possible is essential. With a life insurance policy, you can secure your loved ones now and ensure their financial security and well-being in your absence.