10/07/2016
What is life insurance? Most people in India only take insurance because it will save them tax or the agent explained that there would be a money back or high returns etc... While it does save sax when one takes insurance (as per provisions of section 80C of Income Tax act) but the real reason for taking life insurance is to ensure that if something happens to an individual then his near & dear ones can at least has some form of financial security. For instance if I earn say 100000 p.a then upon my death my famil looses this income. If I assume a bank interest rate of 5% then to generate 100000 p.a I would need a lump sum of 20 Lakhs. Therefore one way to ensure that my family keeps getting 100000, if something were to happen to me is to get life insurance of 20 Lakhs. The most cost effective way of doing this, is to take a level term assurance policy which will not cost much and meet this objective.
