Uses of Life Insurance in India

1. Financial Protection for Family

• The main purpose is to provide financial support to the policyholder's family if they pass away.

• The sum assured (lump sum payout) helps the family manage expenses and maintain their lifestyle.

2. Income Replacement

• If the policyholder was the main earner, life insurance replaces the lost income.

• It helps cover everyday expenses, children’s education, debts, etc.

3. Debt Repayment

• Life insurance helps pay off loans or liabilities (like home loans, personal loans) in case of the policyholder’s death.

• Prevents the family from falling into a financial trap.

4. Long-Term Savings & Investment

• Plans like Endowment and ULIPs offer both insurance and savings/investment benefits.

• Useful for wealth building, goal-based savings (like child’s education, marriage, retirement).

5. Tax Benefits

• Premiums paid qualify for tax deduction under Section 80C (up to ₹1.5 lakh per year).

• The maturity/death benefit is tax-free under Section 10(10D) (subject to certain conditions).

6. Peace of Mind

• Knowing that your loved ones will be financially protected gives peace of mind.

• It's a responsible step in financial planning, especially if you have dependents.

7. Support During Retirement

• Some life insurance plans offer regular income or lump sum during retirement years.

• Helps with financial independence in old age.

Example:

If a 35-year-old with a ₹1 crore term life policy dies unexpectedly, their family receives ₹1 crore, which can:

• Cover children’s education

• Pay off a home loan

• Provide monthly income from interest