Before the Covid-19 pandemic brought about a multitude of attitudinal changes in our lives, life Insurance may well have been one of those things that we ignored thinking about until an eventuality arose. However, if anything, living through the most uncertain times of our lives should only make us realise that life insurance is a necessity rather than a backup plan to cover finances during an unforeseen emergency.

Today, life insurance has become an irreplaceable tool offering comprehensive financial security that protects your loved ones from life’s future uncertainties. On the occasion of National Insurance Awareness Day, take a look at three things that underline the importance of life insurance as a truly essential component of one’s financial planning.

A multi-dimensional pillar of financial security: A robust life insurance policy is the pillar of financial security. Aside from safeguarding the future of your loved ones and helping them lead a dignified life in your absence, a life insurance policy also doubles up as a savings instrument helping with a wide variety of life stage needs, from securing your child’s future to wealth creation, and retirement planning.

Another aspect that many customers are unaware of is the availability of loans against certain life insurance policies. By evaluating the policy type and its surrender value, the life insurer can provide you a loan that can help tide over immediate monetary needs.

Tailor your policy to match changing life stages and needs: A life insurance policy requires constant attention and regular scrutiny. Whether you are single, newly married, approaching retirement, or are in any stage in between, a life insurance investment can make for a prudent instrument in your financial toolkit.

One needs to be aware that different kinds of insurance policies can help cater to financial needs at varied life stages, and hence one must be prudent in its choice. Also, to enhance the effectiveness and impact of the insurance policy, one can add riders to the base policy to safeguard against specialised requirements.

Riders being entirely optional can serve as important add-ons to increase the benefits of your life insurance policy. They can also offer additional benefits to meet the unique requirements of individuals and help enhance their financial protection.

Research, Remember, & Realign: Researching has to be the most important consideration while investing in a life insurance policy. Before committing, customers should invest a significant amount of time and effort in researching online, interacting with prospective sellers, and reviewing the contours of their product policy.

It is also crucial to remember the significance of the sum assured and claims paid ratio of a life insurance firm before buying any policy. Simply put, sum assured is the amount that an insurance company guarantees to pay policyholders on the occurrence of the insured event. Also, an adequate sum assured provides financial security to the family and the loved ones, enabling them to deal with tough times.

In the face of the pandemic, the increase in awareness on sum assured has been heartening to see. A recent survey has revealed the increasing importance of sum assured among respondents in urban India, where 69 per cent (as opposed to 63 per cent previously) consider it as an important product parameter when buying term insurance.

Equally important to note is the claim paid ratio of an insurer before making the purchase decision. By giving you an indication of the number of claims that the insurer has paid following the death of policyholders, the company’s declared claims paid ratio helps reassure the kind of security you can expect from the life insurer, should the eventuality arise.

One needs to remember that no amount of money can replace your health and wellbeing or the role you play in your family. However, by investing in the right life insurance plan, you can rest assured of your family's financial security in case of any unfortunate incident. Much like how a vaccine shields us from adverse effects of the virus, a life insurance policy is a protective gear to manage exigencies without distressing our base finances.

The author is Chief Marketing Officer, Max Life Insurance

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.