Three Advantages of Life Insurance Policy

Is the premium paid on life insurance policy is an expense? Do you think life insurance policy is a financial burden? As an individual having life insurance policy, how you can benefit from it? It has multiple benefit and advantages that you should know and it helps you to manage your finances as well in the long term.

Generally, majority of people think that the premium paid on life insurance policy as an expense. When it comes to pay the annual payment, they take a note in their mind that they will have expense of premium of insurance policy and they start adding the premium amount on expenses side of their personal income expenses sheet. But actually, it is not an expense. However, you pay certain sum of money but do not put it in expenses side, take it as an investment. Basically, there are three advantages of it.

  1. Saving: The amount paid every year as premium is the saving. The yearly paid premium gets accumulated and at the maturity, the beneficiary/policy holder gets the insurance value along with the bonus accumulated in the policy. (Total premium paid plus the bonus). So this is the saving that you have made over the period of policy and got the bonus as return on investment.
  2. Tax Benefit: The yearly premium paid amount is deductible from the income of an individual which helps an individual to save income tax. The amount of deduction is different in various country as per the income tax law of the country.
  3. Risk Coverage: The insurance covers the risk as well. In the event of accident, illness or death of policy holder, it covers the cost of treatment, medicines or the whole sum insured along with the bonus till time is refunded to the nominee.

So, the premium paid for the life insurance is not an expense, it is an investment which will return your investment along with ROI and also covers the risk as per the policy and also helps in income tax deduction. It minimizes the risk and maximize your return on investment.

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