1. Sum assured

When you take plans that come with survival benefits like an assured sum on the maturity of the insurance plan, you can then utilize that amount by setting it aside for a fixed deposit investment or to purchase a capital asset.

Term plans, however, only provide protection in case of death and you will not receive the money you invested in it otherwise. Also, the premium to be paid on term insurance is smaller.

You can pick your preference of insurance plan based on your intention of just seeking coverage or for creating wealth.

2. Protecting your family from your liabilities

If you have taken a home loan or any another long term debt, having a life insurance will protect your family from your liability to a certain extent. This is especially needed if you have minor children.

3. Financial independence

Especially if you are the only earning member of the family, your dependents will be left paralyzed by your loss. Your house, child's education and general monthly expenses will be hard to cover.

Therefore, it is advisable to start an insurance early and for a longer period, so that you can pay a smaller premium for a longer time. After this, you can go ahead and plan on buying a house, and other investment schemes without leaving your family exposed to vulnerability.

Additionally, some insurance policies also provide coverage on permanent or partial disability that leaves you incapable of getting employed.

4. Tax Exemptions

A maximum deduction of Rs 1.5 lakh can be claimed within the slab under section 80C of the IT act for the premium you pay toward the life insurance. Note that your gross premium paid during that financial year should not exceed 20 percent of the sum assured.

You will also be eligible for a tax exemption under section 10 (10D) for bonus or sum received from the policy. Additionally, the final sum received as death benefit by your dependents on your demise is not taxed in their hands.

5. Wealth creating instruments

If you currently do not have any dependents but you are looking for safe investment options with guaranteed returns and tax benefits, you can opt for a life insurance plan.

Additionally, plans like United Link Insurance Plans (ULIP) that are linked to market securities, allow you to gain higher returns on your premium invested and provide you with life cover. Note that higher returns from ULIP cannot be assured as they are dependent on the performance of the market.

You can also take a loan from the bank against the sum assured.