The perks of buying a life insurance policy go beyond protecting one’s family in tough times. Undoubtedly, it is a necessity to safeguard one’s dependents (in case of one’s unfortunate and untimely demise, accidents or physical disabilities that lead to a loss of income), but there is a long list of other benefits, too, that make it a lucrative choice among individuals.

Sadly, most people are not aware of the many benefits associated with it - all they care about, understandably, are the death and disability benefits. However, there is a long list of benefits attached to the policy such as maturity benefits, tax benefits etc.

1. Loan Against a Life Insurance Policy:

Till date, many people don’t know that life insurance policies can also be used to secure a loan at a significantly more competitive rate as compared to other modes. One can get a loan from the same company or a bank or NBFC (Non-Banking Financial Company).

The maximum amount of loan an individual will be able to get depends upon the type and surrender value of his/her policy.

Generally, the loan amount is a percentage of the surrender value of the life indemnity policy and it can go up to as high as 80% to 90%. There are few companies that only allow loans amounting to 50 percent of the total premium amount paid by the policyholders to calculate the maximum loan amount they can be eligible for.

2. Online Payment Rebate

Most individuals have never heard about the online payment rebate benefit, but it’s important to note that the payment mode chosen by an individual drastically affects the premium of a life insurance policy. In fact, an insurance company’s servicing cost considerably goes down when an individual opts to pay his premiums online.

This is because there is no cost involved on paperwork in this case. Therefore, the life insurance company is able to save a significant amount on the commission, which is generally paid to the agents.

Varying from company to company, this rebate might have already been given to the policyholders before the online premium rates are quoted to them.

3. Refund on the Sum Assured

This benefit might surprise many customers, but there are many life insurance companies that offer rebates for a higher sum assured. This is because the servicing cost of all the policies belonging to the same category is almost the same; hence, a higher sum assured means a lower cost of servicing per unit of sum assured, for the insurance company. Subsequently, this translates to higher returns or profits per unit of the sum assured/premium paid, which explains the rebate on the sum assured.

4. Rebate as per the Periodic Payment Chosen

Almost every insurance company offers the periodic payment option to its customers which can be in the annual, half yearly, quarterly or monthly mode.

In this case, the higher the frequency of payment one chooses, the higher the servicing cost will be (comprising of administrative, processing and collection costs) for the insurance company.

Furthermore, if a policyholder chooses to pay his premium at one go for the complete year, the company can use the available funds for investment purpose which automatically means more profits and benefits for the company.

This rebate is often already included into the premium rate offered by the company once a customer chooses the periodicity for the payment.

5. Taking Care of One’s Business

There are some life insurance companies that provide an option, wherein if the policyholder owns a business, his business partners can purchase his share without any hassles (after the policyholder’s death). In this scenario, the business partner/s will simply have to enter into an agreement with the insurance company and the pay-out received after selling the policyholder’s share will be given to his dependents.

However, it’s important to understand here that the nominee or the dependents of the policyholders do not get a stake in the company.

6. Tax benefits

Under section 80C of the Income Tax Act, any amount of life insurance premium paid by a policyholder is eligible for a tax rebate, irrespective of the fact if it’s for oneself, their spouse or their children (premium paid for parents and in-laws is exempted).

The policyholder will get the tax rebate facility for all the premiums he is paying and this benefit is available with all the life insurance companies – be it from private sector or public. This benefit has been explained further below.

An individual can save taxes under Section 80C of the Income Tax Act, 1961. Under this section of the IT Act, the premiums paid towards the policy are eligible for tax deduction. What’s more, the insurance policies, which offer maturity benefits, also qualify for tax deductions on the maturity proceeds of the policy under Section 10 (10D) of the Income Tax Act, 1961.