7 Key Benefits of Buying Life Insurance in 2025

Life insurance has become an essential aspect of financial planning in recent times. With increasing uncertainties, more people are realising the importance of securing their family's future in case of any eventuality. While many still consider life insurance just another tax-saving investment, it is much more than that. As we are halfway into 2025, here are the key benefits of life insurance that you should know:

1. Protect Your Family from Financial Hardships

One of the primary benefits of life insurance is to protect your family from financial troubles in case you are not around. Your untimely absence can lead to a complete loss of the regular income that supports daily expenses and the needs of your family members.

• Without the primary earning member, running daily household expenses like groceries, utility bills, EMIs, rent, and transportation becomes difficult on a regular basis to afford as the major income source is lost.
• Ensuring continuity of children's education becomes challenging as large expenses like school/college fees, private tuitions, educational books and stationery costs put pressure on the limited savings, threatening discontinuity.
• Repaying ongoing loans like home loan, vehicle loan or business loan EMIs becomes almost impossible without regular income, as the EMIs are structured assuming the primary earning member would continue paying every month during the tenure.
• Paying for healthcare costs and treatments like hospital charges, medication expenses, and specialist appointments can burn through savings quickly in case of medical emergencies. Arranging such huge funds without an income flow becomes extremely difficult.

Having life cover ensures your family maintains the same lifestyle and your children's future is secure. The lump sum amount acts as a financial backup to replace the earning member's income sources.

2. Cover Major Financial Goals

The corpus received from the life insurance claim helps the grieving family complete major financial goals that may have been obstructed otherwise due to the income loss. These include:

• Fund children's higher education expenses, as the cover amount acts as a reserve for rising college fees. The family need not compromise on the quality of education.
• Give a boost to retirement corpus building, which was dependent on the earning member's income. Surviving members need not start planning from scratch.
• Provide backing for children's wedding expenses in case their own savings are inadequate for large costs. Removes strain.
• Clear outstanding big-ticket loans, such as home and vehicle loans, to retain asset ownership without the burden of EMIs. Capital to close debts.

Appropriate life cover estimation done today will ensure a sufficient corpus for these goals in the future.

3. Tax Benefits

Life insurance policies come with tax benefits that lead to financial savings. The premium you pay is eligible for tax deductions under Section 80C of the Income Tax Act, 1961 up to ₹1.5 lakhs per financial year. This benefit is available for policies held in the name of self , spouse or any dependent child of such individual. ).

Additionally, the maturity proceeds received under a life insurance policy are exempt from tax under Section 10(10D), subject to the conditions specified in the provision.

Death Proceeds are completely exempt except for keyman insurance policy and employer-employee policy.

These deductions lower your tax liability and help you save more. You can then use these savings to invest in other financial products.*

4. Get High Life Cover at an Affordable Premium

The biggest advantage life insurance offers is the provision for policy buyers to gain a very high level of life cover by paying relatively affordable premiums. Depending on income, expenses and responsibilities, the optimal life cover requirements for a family may go above 1 crore.

Due to competitive insurance market dynamics currently, such high coverage is available for reasonably priced, conveniently payable yearly, half-yearly or monthly premiums. For example, a basic term policy of 1 crore can be issued to a healthy 35-year-old for a yearly premium of just ₹6000-7000.

The premium varies based on the chosen cover amount, policy tenure, age, medical reports and insurer. Still, there is massive scope for most individuals or families to arrange life covers adequate to replace income, clear loans, secure goals by customising requirements with insurers at affordable premiums.

Nowadays, most people take loans for essential expenses like home, car, education, weddings, etc. In case of your absence, the burden of these debts falls on your family.

Having adequate life insurance coverage ensures all your outstanding loans are paid off. This gives your family financial strength sans the loan EMI worries.

5. Wealth Creation

Several life insurance plans, like ULIPs, endowment policies, and money-back policies, help create wealth. These offer life risk coverage with market-linked returns on the premiums paid. Based on your risk appetite and investment duration, these policies generate a good corpus.

If well-planned, your nominee receives a life cover amount along with a maturity benefit to utilise as per needs. Hence, life insurance not just gives protection but also acts as an income generator.

6. Access to Loans Against Policy

Many leading insurance companies offer loan facilities against eligible policies to policyholders to meet urgent or temporary money requirements.

Under this facility, you can access loans up to 80-90% of the surrender value of your policy by submitting it as collateral security without the need to cancel your policy. The rate of interest on such insurance policy loans is very reasonable, typically at 10-18%, which is much lower than other sources of loans.

This gives you quick access to some liquidity or cash in hand to fund medical emergencies, legal expenses, business working capital needs or children's education fee instalment. You get flexibility of tenure up to 1-2 years to repay the loan amount borrowed ,along with the interest component.

Once your financial situation improves, you have the option to systematically repay the loan outstanding and associated interest to your insurer. After repayment, your policy continues as normal throughout the policy term, providing full coverage.

7. Covers Critical Illnesses

Nowadays, several leading life insurers offer critical illness riders as add-ons along with basic term or endowment policy plans. These riders provide a lump sum financial coverage ranging from ₹3 lakhs to ₹50 lakhs on diagnosis of over 30 serious ailments.

Upon diagnosis of a covered illness, you can file a claim under the critical illness rider. If all required documents are submitted, insurers typically aim to disburse the payout within 7–15 working days. However, actual timelines may vary depending on the insurer's claim processing and verification procedures. The amount received is tax-free, subject to compliance with the conditions specified under the Income Tax Act, 1961.

Such payouts are extremely useful considering 2 in 3 Indians have a probability of getting cancer during their lifetime. Furthermore, India records the highest deaths due to cardiac diseases globally. Treatment costs for such diseases are rising exponentially, making them unaffordable.

The income losses and prohibitively expensive treatments due to these chronic health conditions may completely destabilise the savings you have created for your family. Having an adequate critical illness rider ensures you have enough corpus even in those difficult times to pay huge medical bills while meeting monthly household expenses.

Factors You Should Consider While Buying Life Insurance

• Age and Life Stage
• Income Level and Financial Dependents
• Loans and Liabilities
• Long-term Savings and Goals
• Current Health and Medical History
• Coverage Options and Tenure
• Claim Settlement Records of Insurer
• Premium Payment Flexibility

Why Is Life Insurance Essential for Your Financial Plan?

• Ensures family financial security in the absence of income
• Debt repayment, so savings are not drained
• Continuity of goals like children's education, retirement
• Building assets like a house even after the loss of a breadwinner
• Peace of mind and mental wellbeing

Final Words

Considering the uncertainties of life, buying adequate life insurance is no longer an option but a necessity. It acts as a backbone to maintaining your family's living standards when you are not around. Furthermore, the policies come loaded with wealth creation and tax-saving benefits.

With the first half of 2025 almost over, now is the right moment to pause and reassess your current life insurance coverage, keeping in mind the relentlessly rising medical inflation and your family's growing financial responsibilities. Doing a mid-year check-in allows you to course correct if existing life covers fall short of providing comprehensive protection against unforeseen events in the coming years.

FAQs on Benefits of Life Insurance

Which life insurance is the best?

Term life insurance is considered the suitable form to opt for in a pure insurance and protection context as it provides a high cover amount at lower premiums.

What is the main benefit of life insurance?

The main benefit life insurance provides is financial compensation to the nominees in case of the death of the insured person, thereby giving protection against loss of income that may destabilise the family.

Is 1 crore life insurance enough?

Depending on the number of financial dependents and liabilities, one crore life cover may be adequate for some, while for others it may fall short, especially if major goals also need to be completed. Calculation of the optimal amount is crucial..

What is excluded in life insurance?

Standard life insurance policies may exclude claims arising due to suicide, usually for the first year of policy commencement. Certain high-risk professions or pre-existing health conditions may also hamper the scope of total coverage approval.