Insurance

Insurance and its Tax Benefits

Saving taxes is everyone’s predominant motto when it comes to investments. Thankfully, the Income Tax Act 1961, has allowed various types of investment avenues to be exempt from the purview of income tax. If you choose these avenues for investment, you can earn tax exemptions and deductions on the amount you invest, the returns generated and the benefit you get.

When it comes to insurance too, you can earn income tax exemptions. Both in the case of life insurance and health insurance plans, tax exemptions are available. Let’s explore how –

Related Article: Retirement through Equity Linked Savings Scheme

Life insurance and tax benefits

Premiums and tax benefits

The premiums paid for a life insurance policy are tax-free under Section 80C. The premium is deducted from your gross total income and, thus, lowers your taxable income. The maximum limit which you can claim as an exemption is Rs.1.5 lakhs. The premium can be paid for a policy taken by yourself, your spouse, and your children’s life.

Furthermore, the premium that you pay should not be more than 10% of the sum assured of the life insurance policy. So, if your policy is for Rs.5 lakhs, your premium should be Rs.50,000 or less to be eligible for tax exemption.

One thing which you should remember is that your premiums would be allowed as exemptions only if you hold your life insurance policy for a specified tenure. ULIP plans should be held for at least 5 years while other life insurance plans should be held for at least 3 years. If you do not hold the plans for these specified durations, the exemption allowed would be reversed back in the year you surrender the plans.

For premiums paid towards a pension plan, Section 80CCC would be applicable for claiming an exemption. The limit and other exemption conditions would be the same.

Policy proceeds and tax benefit

The maturity benefit or the death benefit which you receive is also tax-free in your hands. These benefits would not attract any tax under Section 10 (10D). Furthermore, there is no upper limit on the number of benefits that qualify for tax-exemption. Any amount you receive would be tax-free given the premium paid is below 10% of the sum assured. If the premium exceeds 10% of the sum assured, the entire maturity benefit would be taxable in your hands. The death benefit, however, would not be taxed even if the premium is above 10% of the sum assured.

Related Article: Unheard Facts of Budget 2021

Annuity/pension plan proceeds and tax benefit

Under pension plans, whether traditional or ULIPs (Unit Linked Insurance Policy), the tax treatment of the policy proceeds is different. You have the facility of withdrawing 1/3rd of the proceeds in cash when the plan vests. This withdrawal is called commutation of pension and it is tax-free under Section 10(10A). However, the remaining 2/3rd portion of the policy proceeds, which are paid as annuities, are taxable in your hands. The annuity pay-outs you receive would be taxable at your income tax slab rate in the year in which you receive the pay-outs.

Health insurance and tax benefits

Health insurance plans also provide tax relief for the premiums that you pay. Health insurance premiums are exempted from tax under Section 80D. You can avail a maximum of Rs.1,00,000 as an exemption from health insurance premiums. Here’s how –

If you buy a policy covering you and/or your family	You can claim a maximum exemption of Rs. 25,000
If you are above 60 years of age and buy a policy covering you and/or your family	You can claim a maximum exemption of Rs. 50,000
If you buy two policies – one covering you and/or your family and another covering your dependent parents	You can claim an exemption of Rs. 25,000 (for the policy on your family)+ Rs. 25,000 (for the policy on dependent parents) – Rs. 50,000 (total)
If you buy two policies – one covering you and/or your family and another covering your dependent parents and your dependent parents are above 60 years of age	You can claim an exemption of Rs. 25,000 (for the policy on your family)+ Rs. 50,000 (for the policy on dependent parents who are senior citizens) – Rs. 75,000 (total)
If you are above 60 years of age and your dependent parents are also above 60 years of age and you buy two policies – one covering you and/or your family and another covering your dependent parents	You can claim an exemption of Rs. 50,000 (as you are a senior citizen)+ Rs. 50,000 (for the policy on dependent parents who are senior citizens) – Rs. 1,00,000 (total)

So, both life and health insurance plans provide you tax relief. While the premiums for both these plans reduce your taxable income, the policy proceeds of life insurance plans give you tax-free returns too. So, the next time you are investing in an insurance policy, know its tax implication.

ULIPs with an annual premium above ₹2.5 lakh to be taxed.

Finance Minister in budget 2021 has made the maturity proceeds of the unit-linked insurance policies (Ulips) taxable. However, it will be taxable only if the annual premium is above ₹2.5 lakh. The rules will apply for Ulips issued on or after 1 February 2021. According to the Budget memorandum, “Under the existing provisions of the Income Tax Act, there is no cap on the amount of annual premium being paid by any person during the term of the policy. Instances have come to the notice where high net worth individuals are claiming exemption under this clause by investing in Ulips with a huge premium. Allowing such exemption in policy/policies with huge premium defeats the legislative intent of this clause.”

Are you wondering what will be the tax rate?

Ulips will be taxed at 10%, above an annual exemption of ₹1 lakh, at par with equity mutual funds. It is an attempt to rationalize taxation of Ulips. The non-exempt Ulips shall be provided with the same concessional capital gains tax regime as available to the mutual fund to provide parity with equity mutual funds.

Currently, the entire amount received under a life insurance policy is exempt under section 10(10D). Section 10(10D) of the Income Tax Act exempts any amount received under a life insurance policy including Ulips, if the sum assured is more than 10 times the annual premium. This exemption includes death benefits, maturity benefits and accrued bonus. It means until now, there was no upper limit applicable to the claim against a life insurance policy.

7 Habits That Make Life Insurance Costly!

Awareness about Term Life insurance has increased manifold. Many people are either already insured or wanting to insure themselves. Buying term insurance is very convenient nowadays. With the ease of online insurance plans and Low-cost insurance, it has become an important part of a long term personal financial plan. While the loss of a near & dear one is emotionally devastating, term life insurance at least helps you to ensure that the financial loss does not worsen the tragedy.

We can calculate insurance cost online with few clicks based on some general questions but your final premium is based on your health and medical history and other factors. While applying for Life insurance policy, insured has to disclose facts & various personal details like age, height & weight,  Income, health, habits etc.

Cost of insurance differs from person to person.  Mainly life insurance cost depends on mortality rate. Any factors Which increase the chances of mortality increases your cost of insurance. Higher the risk higher the cost. There are many factors which affect mortality. Few of them are not in your control. These include your age, health & medical history of yours and family or whether you have any pre-existing medical conditions. However, you can control or change few of your unhealthy habits which will reduce your cost of insurance.

1. Weight

Your height and weight are one of the most important factors which affects your life insurance cost. Insurance companies needs to determine whether you are healthy person by calculating your BMI (body mass index). Based on this insurer decided if you are overweight or underweight as per their pre-decided measurement of weight in proportion to your height. Overweight / Underweight puts insured at more serious health issues like diabetes, stroke, heart attack etc. If you are able to control your weight and maintain a healthy BMI i.e. balanced weight as per your height, you will be able to save more on insurance cost.

2. Smoking & Drinking

Insurer ask question in the application form about your drinking and smoking habits of individual. If you are smoker then question like how many cigarettes you smoke in day and if you are drinker then question will be asked about how many units of alcohol you drink per week / day. There is substantial difference in life insurance premium for non smoker and non drinker individual’s.

3. Adventurous Sports

Any individual who enjoys and involved in activity like trekking, bungee jumping or sky diving, car racing etc. are classified as highly risky  and can result in high life insurance cost.

4. Working in a Risky job

Your job and current profile also plays a crucial role in deciding insurance cost. If you are working in merchant navy or mining job or as pilot or any other high risky job, it increases professional hazard. Insurer charges lesser premium to people who works in administrative job and higher premium to people who working either in high risk job or may be posted in an area where life risk is very high.

5. Taking Drugs

If you are habitual of taking illegal drugs like Marijuana, cocaine etc. it will impact your life insurance cost. If you are tested positive during pre medical test for insurance either you are asked to produce more documents to prove you don’t consume drugs or, your insurance policy application could be denied outright. Once your application is rejected, for life time while applying for any policy after that you have to mention reason for rejection of the previous policy.

6. Lying on your Insurance Policy

Insurance is contract of utmost good faith. As insured you are expected to disclose all the fact related to your life insurance policy. Any act of non discloser is deemed as intentional and if found at the time of claim, will result in rejection of claim by insurer. So It’s advisable to disclose all the fact and personal details while filling the application form.

7. Lifestyle

Nowadays hectic and stressful lifestyle has affected health of many people. Working for extended hours, junk foods, poor diet, no time for exercise etc. its established that they are associated with poorer health. Insurer evaluates various factors like your height & weight and medical condition, if not found healthy, increase your cost of insurance.

These were the 7 habits that you should control to reduce your insurance cost drastically.

Related Article: Types of Health Insurance policies amid COVID-19

Things to Know Before Buying an Endowment Plan

Many of us are impulsive buyers and a lot of the times we end up spending on a whim. We buy things which we may or may not need in the future. While treating yourself to such pleasures is in no way a sin, one should give equal thought to securing their future. If you relate to this, buying an Endowment Plan could be the solution to your savings and future security. People who have a steady flow of income benefit the most from an Endowment Plan. However, it is important to understand what an Endowment Plan is before investing in one. This article will take you through most of the salient features of an Endowment Plan and let you consider if an endowment plan is a right pick for you.

Some Key Features

Endowment Plans are basically life insurance policies that allow you to save systematically over a specific time period. Eventually, these guarantee you a well-rounded big sum of money once they mature. Apart from this, endowment policies also give you life coverage. At the same time, they can be used to fund various financial needs like retirement savings, buying a new home, children’s education, their marriage, etc. Not only will you receive Endowment Plan benefits once the plan matures, but in case of an unfortunate accident, the beneficiaries listed on your plan will receive the promised sum of money.

There following are the four major benefits that you can avail when buying an Endowment Plan:

• Tax exemptions under Sections 80C and 10(10D) of the Income Tax Act
• Secure the finances of loved ones
• Savings based on targets and goals
• Availing loan against the policies in case of emergencies

Should You Opt For An Endowment Policy?

If you are an impulsive buyer or a shopaholic without a financial backup, this might be a very suitable option for you. Endowment Policies are great saving options if you are looking for a proper retirement plan with financial security. As mentioned above, an endowment policy offers you a big, well-rounded figure at the end of its maturity, later in life. If you are looking for long-term benefits that provide double privileges of savings along with life coverage, you could consider buying an Endowment Policy.

Proper circumstances to go for an Endowment Plan

We all need a no-risk assured plan to invest based on our financial needs. Therefore, before choosing an Endowment Plan, keep three things in mind and invest thereafter. They are:

• Achieve your financial targets and goals
• Ensure financial security and stability for your family
• Long-term savings plan such as retirement plans or other heavy expenditures that might come your way

Apart from these, the other most important factor should be a regular flow of income. Consider buying an endowment policy which fits your needs, only if you can guarantee a steady flow of money. You cannot afford to miss out on paying your premiums by the notified due dates. It is important to understand that you will enjoy better benefits if your policy runs for a longer time period. Hence, a regular flow of money is important.

Why should you choose an Endowment Plan?

The most important reason why you should go for an Endowment Plan is that you will get life coverage apart from the opportunity to lay the foundation stone to secure your future financial position. Moreover, it will give you a way to be disciplined when it comes to saving for your financial needs. The risk associated with investing in an Endowment Plan is very low. Therefore, even though Endowment Plans give you relatively lower return benefits, they are more stable and secure in nature. As mentioned above, you are also eligible to tax exemptions from the Income Tax Department of India. At the same time, the other listed beneficiaries will receive the full sum of money in case of the untimely event of your death.  This secures a future not just for you, but also for your loved ones, thus making it a risk-averse investment.

Kinds of Endowment Policies

There are mainly two types of endowment policies:

1. Ones that come with profits and
2. Ones that come without profits

In general, there are various kinds of endowment policies available nowadays. Each of them focuses on the different kinds of needs you might have. These can range anywhere from securing a more protected retirement life to funding your child’s education or any other goals and targets which might be precious to you. It is important to discuss your options with a financial consultant and understand which kind of a plan will be most beneficial to you.

Things to Keep in Mind Before Investing in an Endowment Policy

There are three points, which you should carefully consider before buying an endowment policy. They are as follows:

• There are many different types of endowment policies available. Before choosing one that fulfils your long term needs, always check for quotes. Look at, and compare the various interest rates and maturity benefits that the endowment plans have to offer before investing in one. You should also consider a few other factors such as your steady income, life-stage, needs, risks, etc.
• Always do a thorough background check on the company before investing in one of their endowment policies. Look out for their claim settlement ratio, customer service and financial stability. It is better to be cautious, rather than regretting later once the policy has been bought.

Related Article : 4 Things You Need To Consider Prior To Purchasing A Term Insurance Plan

You should check for previous track records of the company. A Unit Linked Insurance Plan (ULIP) provides higher return benefits compared to an Endowment Policy, but they are prone to higher risks. So, a comparison of the return rates is crucial before committing to a company and buying an Endowment Plan for your needs.

TERM LIFE INSURANCE OR WHOLE LIFE INSURANCE – WHICH ONE IS THE BETTER FOR YOU?

Life insurance plan is one of the best types of investment that a person can make to ensure the better future of their family and the members that are dependent on you. Life insurance provides you the financial support that your family members require when you are not around to take care of their needs. The financial support is provided in the form of the life insurance coverage.

There are two types of life insurance plans available in the market. The first one is the whole or permanent life insurance plan and the other one is the term life insurance plans.

Before applying for the life insurance plans you must first ensure which one of these policies is the best suited for you. The whole life insurance plans are for the people that have a higher income range and can afford to pay a higher premium for the life insurance plans. The whole life insurance policy is the way to reduce the net taxable amount of the individual’s income so that the tax is reduced and it is a part of a smart financial planning method. 

Term life insurance plan are comparatively cheaper than the whole life insurance as the premium to be paid for these term life insurance plans are less and for a fixed duration of time. There are several pros and cons related to each one of these life insurance coverage plans and you should choose the one that fulfills all of your needs for the future without risking the financial stability in the present.

How can you choose between the two different life insurance coverage plans?

It can be a tough task for you to choose between the life insurance plans that is best for you as each of these life insurance plans have associated benefits with them. You should take a closer look at all of the aspects that are related with both the life insurance coverage plans. We’ll introduce you to both the term insurance plans and whole life plans and you can decide which one of these is the best one for you.

Related Article :- Top Secrets to Choose the Best Term Insurance Plan

Term life insurance

• It is the life insurance coverage for a fixed period of time.
• It is often called as the “pure life insurance” as it provides the financial support and help to your family when you are not alive and cannot take care of your family.
• It covers the premature death of an individual and provides the death benefit to the beneficiaries. Usually, there is no maturity benefit.
• The term insurance can be purchased for a time period of 5, 10, 20, or 30 years.
• The premiums of the term insurance are way cheaper and cover provided is huge as compared to the whole life insurance plans
• You can add additional benefits to the term insurance plans and make it more beneficial for your family by adding various riders to your term insurance plans.
• Term life insurance provides your family financial support at the times when the dependents are at the most vulnerable financial stage and need money for a better future.

Whole life insurance

• They are also known as the permanent life insurance plans.
• The whole life insurance coverage plans provide you the lifelong death coverage.
• It also includes an investment factor in these type of life insurance plans as the called as the cash value of the life insurance plans.
• These plans can be used as a tool for estate planning. It ensures smooth transfer of wealth to beneficiaries.
• You can opt for this life insurance plan to cut out your net taxable income and thus the less tax return is to be paid.
• You can easily borrow money from the banks on the basis of the cash value of your life insurance policy. You have to pay back the borrowed money and the due interest on time else the cash value and death coverage of the life insurance policy will decrease. And if you surrender the policy then you can no longer receive the death coverage.
• The borrowing of the money is easier and tax free against the whole life insurance policy.
• Whole life insurance helps you to provide financial coverage until you turn hundred years old but you have to pay the premium regularly.
• Some of the companies also provide bonuses every financial year.

Related Article :-Why Do You Need Critical Illness Insurance Plans?

These are some of the features that are provided to a person when she or he applies for any of the life insurance policy. From the above features, it is easier to extract the information that the individuals having a higher net worth and are looking for a way to reduce their taxes from the business can opt for whole life insurance but for an average income individual, the term life insurance is the best option.

Complete Guide for buying Health Insurance Plans

Health insurance policy has become a fundamental requirement of every individual, thanks to the inactive life lifestyle most people tend to live today. This too is a reason why people are really worried about their health as a matter of fact. Therefore, they consider a lot of options when thinking of buying any health insurance policy.

Health insurance plans protect you during an unanticipated medical crisis and help in balancing your family’s finances during such a difficult time. Medical insurance has indeed become an obligatory thing to have today considering the rise in medical expenses and an increase in the number of diseases. A medical emergency can arise at any time and affects an individual and his family both financially and emotionally. Thus, financial advisors advise that it is prudent to buy health care policy and insurance plan in advance.

With the evolution in human being’s mindset, they have started contemplating the radical aspects of their life and the health care necessities. And the best thing is that they have started acknowledging the fact that they indeed need health insurance whether its rationale or not.

Related Article: Types of Health Insurance policies amid COVID-19

That being said let us look at some reasons why you really need to buy a medical health insurance plan.

• Insufficient corporate health policy

The importance of health insurance plans cannot be overlooked as the medical costs are rising with passing days. In certain cases, your company’s insurance coverage won’t even be able to cover the expenses of a normal mild sickness i.e. two or three days of medical treatment in a hospital. Also, when you change your job or get retired, your company’s insurance policy will discontinue. So it is sensible to buy an individual medical plan.

• Rise in the prevalence of fatal diseases

Unfortunately, the whole world is fighting with life-threatening diseases. The alarming rate of increased heart diseases to swine flu to AIDS has created a state of chaos everywhere. As the medical costs are skyrocketing, with escalated demand for healthcare services and insufficient access to the topmost medical services (especially for the low-income group), medical health insurance is taking another course of action to fight lethal diseases.

• Improved Healthcare and financial planning

Medical emergencies and accidents can take place without any kind of prior warning and a good health insurance policy will certify that you are secured for medical emergencies. It is hard to guess how much you will splurge on health care around the year but if you have a medical insurance plan then it will definitely help you with sudden medical conditions expenditures. You can buy an individual as well as a family plan policy (covers the entire family). Normally, the family health plans are much cheaper than the individual’s one. 

• Cost Benefits

Under Section 80D of the insurance act, you can get an exemption for your premium payment. The health insurance limit deduction has been increased from Rs15,000 to Rs25,000. The new limit for a senior citizen is Rs50, 000.

• Monetary Worth

Along with handling the hospitalization expenses, medical insurance companies also provide day-to-day hospital allowances for incurred spending on food expenses, going back and forth from home to hospital, and other regular hospital charges. Several insurance companies have started to include domiciliary treatment in their insurance coverage.

Related Article: Family Floater Or Individual Health Insurance Plan – Which One To Opt?

With this guide, you must have got a clear idea as to why it is so important to get yourself adequately insured. So without further delay, buy a health insurance plan for yourself and your family.

Things To Consider Prior To Purchasing A Health Insurance In India

In the modern era of inflation, it becomes imperative to seek out a decent health insurance cover especially if you wish to safeguard yourself as well as your loved ones from falling prey to skyrocketing healthcare expenses. Apart from providing you with adequate peace of mind, it also offers the best chance of recovering back both physically and financially if anything unfortunate happens. Getting a health protection as early as possible is becoming extremely important as once you succumb to issues such as diabetes or blood pressure, your insurance cost starts getting high while the coverage gets low. Today we are going to take you through the most important considerations which can help you in choosing the right cover.

• Even when your company is offering a corporate group health cover, it is imperative to have an individual health insurance in place. This becomes all the more necessary once you lose your job and the company either withdraws the benefit entirely or removes your family members from the coverage umbrella.
• While deciding on the sum insured, you need to consider the present-day costs. Thus, if you are residing in a small city, then you need to opt for a cover ranging from 5-8 lakh INR whereas a metropolitan residence makes it mandatory to increase the health cover quantum to 8-15 lakh INR. It also becomes possible to port from one insurer to another rather than purchasing an entirely new plan. In the porting procedure, the benefits which have accumulated in the old plan are transferred to the new one. You also need to make adjustments to your health cover every now and then for catering to medical inflation.

• Opting for a Family floater policy can keep your back especially if you have a family. This economical alternative can provide greater coverage to your family members while also ranking high in terms of flexibility of using any proportion of the coverage amount in accordance with the requirements of your family.

• It is advisable to purchase a health cover before turning 40 as your propensity of claiming the same remains low at that stage which in turn accumulates a hefty amount of no-claim bonus. This in turn can add up with the original coverage in every claim-free year to provide you with greater benefits.
• It is essential to purchase a health cover which comes with lifetime renewability for keeping your back once you start getting old and the chances of ailments increases.

• We rarely check whether a hospital comes under the cashless list of network hospitals in the case of emergencies. Thus, it is imperative to check the same out to find out the plan offering maximum geographical coverage.
• You should never purchase a health insurance having claim loading as this will just end up making the entire thing costlier if you succumb to any form of critical illness requiring long term cure.
• Your insurance policy should offer you with the required flexibility of restoring the limit in case if the sum assured gets fully utilized. This in turn will help in rendering adequate protection against all unforeseen critical illnesses such as cancer which might otherwise be very difficult to manage. Thus, a sum assured of 5 lakh INR along with a restore limit of 5 lakhs more provides you with 10 lakh INR worth cover without having to incur any extra cost.
• You need to always opt for a plan having high claim settlement ratio as that will ensure that your claim doesn’t get rejected unless the insurer comes up with a valid point of concern.
• It is necessary to channelize the purchase of your insurance through a reputed insurance broker who can assist you with settlement of claims. If you ever succumb to an unfortunate situation, then your physical or mental state might not be of much assistance in filing the claim or fighting with the insurer if the same gets rejected without any proper justification.
• Your application form needs to clearly represent all your details in terms of your health metrics. Thus, if you have any serious ailment, then you need to specify the same in details. You can seek out assistance of your broker while choosing a health plan which can cover your ailments after the passage of a waiting period.

Related Article : Types of Health Insurance policies amid COVID-19

• Most of the modern-day plans cover all pre-existing diseases after 3 to 5 years in accordance with the specific policies. You need to check out the waiting period of your chosen plan and go for the one offering minimum waiting time. Certain companies might offer coverage along with lifetime exclusions. It is advisable to exclude these companies from your sphere of selection.

• Your plan needs to have minimal or no sub limit. Opting for plans having an upper cap on the room rate might just add to your cause of concern as it becomes impossible to decide on the room category when you or your loved ones are being taken to the hospital under emergency conditions. Insurers might even impose sub-limits in terms of doctor’s fees, diagnostics and room rent. Anything incurred above the same needs to be borne from your own pocket. Thus, you need to consider all of these while choosing a policy.

While most of us associate the purchase of health insurance with tax savings, we fail to consider the requirement of getting the backing of a comprehensive medical insurance plan. As a matter of fact, medical emergency can be linked to the core of about 80% financial crisis faced by people. Apart from causing a financial bloodshed, such health emergencies can also deter our ability to earn more thus causing double impact. Keeping such things in mind, it becomes essential to opt for a health insurance plan and coupled with our tips, you can easily choose the one which serves you best.

4 Things You Need To Consider Prior To Purchasing A Term Insurance Plan

Smart investors never fail to set realistic and long-term financial goals to ensure a secure future for themselves as well as their dependents against all unforeseen events. They do the same by investing in term insurance plans which is nothing but life insurance in its purest form for rendering comprehensive financial protection to your loved ones. However, in most of the cases investors fail to conduct adequate research before deciding on a term insurance plan which in turn makes them vulnerable to unscrupulous agents. Keeping such things in mind, today we are going to take you through the four main factors to consider before choosing the right term insurance plan.

• Deciding On The Cover Amount

You need to consider aspects such as your financial responsibilities, age, basic expenses linked to your lifestyle habits, family’s future financial obligations, loans as well as make adequate provision for the rising costs associated with inflation while deciding on the cover amount. Ideally, your cover amount needs to be 20 times your annual income if you are between 25 to 35 years of age while the cover amount needs to be 10 times of your annual income if you fall in the age segment of 45 to 55.

• Determination Of Policy Tenure
  • Based On Corresponding Financial Obligations – You can take note of your upcoming commitments to decide on a suitable policy period. Thus, if a house loan has been taken by you for a span of 30 years, then it is required to avail a term life cover at least for the same time to keep your family covered from any unfortunate event and financial burden associated with the same.
  • Based On Your Retirement Plan – 60 is the average retirement age for most people. You need to ensure that your term insurance cover extends up to your working years to cater to the financial requirements of your family if you retire before time or any other unfortunate event follows suit.
  • Based On Your Age – If you are looking for a low-premium term plan offering high cover, then you need to start with your investments early. A 40 years’ term is advisable if you are in your 20s whereas a term of 10 to 15 years can serve you well if you are in your 50s.

Must read: Top Secrets to Choose the Best Term Insurance Plan

Herein, it becomes imperative to note that the premium stays constant for the entire policy period once it has been fixed and usually an insurance company covers people up to the maximum age of 75 to 80 years.

• Deciding On Payout Options

The payout option chosen by you will have a big role to play in deciding the premium amount of your term insurance policy. You can opt between a lump sum payout with monthly income or simply a lump sum payout. The first option can provide you with regular monthly income coupled with life cover which becomes payable over a span of 10 years. While the simple term plans offer a single sum as death benefit, certain insurance companies offer investors with monthly income and life cover in exchange of higher premium.

• Deciding On The Right Insurer

With a large number of insurance companies offering varying plans, it becomes imperative to opt for the one which suits you in the best manner possible. You can do the same by paying special attention to the points mentioned below:

• Solvency Ratio – This refers to the ability of an insurance company to settle all claims in extreme scenarios. According to IRDAI guidelines, all insurance companies need to maintain 150% solvency ratio for minimising chances of bankruptcy. A good solvency ratio can thus serve as a measure of the insurance company’s health both over short and long term horizon.
• Claim Settlement Ratio – This is indicative of the number of claims which are paid back or policies which are settled by the company. It is advisable to opt for an insurance company having a high claim settlement ratio.
• Market Reputation – You can gain greater understanding about grievance ratio as well as customer complaints by enquiring about the insurer’s market reputation.
• Financial background – This will ensure that the insurer can mitigate all its short and long-term liabilities in the case of a crisis situation.

Must read: Types of Health Insurance policies amid COVID-19

Once you get equipped with all these information, taking the final call in regards to selection of an insurance plan in accordance with your requirements is going to become easier for you.

DO YOU STILL RELY ON HEALTH COVERAGE PROVIDED BY YOUR EMPLOYER?

Health planning is very important as you may never know what is beheld in the future and you are always unaware about the uncertainties and casualties in your life. This is why it is recommended to every individual to have a health insurance. Health insurance is beneficial for you at the time of any medical casualty and you need money for the treatment. The health insurance, for which you are paying the premium, provides you the coverage to support you financially in handling all the bills of the hospitals, treatment of the medical illness and the expenditure of the post treatment procedures.

Well there are various other health insurance plans that are offered to you when you are working in any company. These are group health insurance plans that are provided by the employer to you for any unfortunate events and hospitalization or any medical expenditure and treatments. This may seem like a great plan but do they really provide you enough coverage or are they reliable? These are some of the questions you should ponder over before taking the health insurances provided by your employer.

The employers are bound to provide the health insurance to their employees if they plan to resume functioning post lock down.  Let us understand whether we should solely depend on medical covers provided by the employers.

The cancellation of the health insurance by the employer

There are various conditions and criteria on the basis of which the health insurance plans provided by the employer are subjected to cancellation. The employers have to provide a prior notification to his or her employees about the cancellation of the health insurance, but under some circumstances there are exceptions where the employees may or may not provide the notification about the cancellation of the health coverage.

The changes in the trend is seen hugely in the working group of people with respect to the health coverage provided by the employer

The working group of people in the present scenario are now not referring much to the health coverage provided by the employer as they are learning the other ways from which they can get health insurance with known coverage and with some additional benefits as well.

They have more options with them as compared to the working people few decades back. There are various options to join the health insurance coverage of their parents as a dependant when their parents’ health insurance is at the edge.

Here are few of the major reasons that will encourage you to drop the health coverage plans by the employer and move onto the other available options

• You do not have any control over the health coverage provided to you by your employer. The employer can provide the employees any random amount and it is all based upon his relationship with the employees. It may sometimes happen that the amount you are offered at the beginning of the job is sufficient for you at that particular age but when you grow; the health insurance may or may not be sufficient enough for your family of four. There can be conditions like when you change your job, and your new employer is providing you a little less coverage for the health than in your previous job, the coverage is reduced but the requirements of the individual and the family is still the same.  

• Health coverage is provided until and unless you work under the same employer. Changes in the job will result in the cancellation of your health coverage and you can no longer access the health coverage plan from your former employer. Many of us are currently facing this problem after being laid off from the job owing to lockdown amid COVID-19. These people are not only without a job now but also without a health insurance plan. So solely depending on employer’s health insurance plan is not a good idea.

Must read: Insurance – For Protecting A Smile Or For Saving Tax?

• A fresh health insurance after retirement seems impossible. As long as you are serving the employer and fulfilling his needs, you will be insured with the health coverage. But at the point of time when you retire, the benefits of the health insurance plan exists no more. You may think of purchasing a new and fresh health insurance plan but without any regular income and some medical conditions, it seems to be an impossible task to get a new plan.

• The health insurance provided by the employer is not a necessity but an expense. The employer can cut short these group health insurances whenever he or she wants as the provision of these health insurances is not an obligation for the employer. It is just another expense for the employer to gain the tax credits and prevent him or her from paying any tax penalties.

• The extent of the coverage is not known by the employees. It is seen in most of the work places that the employees are unaware of the time period for which the health coverage is provided by their employer. You remain relaxed depending completely on the health insurance plan that you are offered by your employer without even knowing the nature of the health coverage and the extent of the coverage provided to you.

It is now made easier to port your group health insurance to personal health insurance under the scheme of IRDA and you will also gain the benefits of the waiting period as well. Do you still rely on health coverage provided by your employer? It is highly recommended that you get yourself adequately covered outside employer’s health insurance and treat the employer’s health insurance plan as just the add on benefit.

Insurance – For Protecting A Smile Or For Saving Tax?

It is always best to do your tax planning at the start of the new financial year.  However, this year most of us could not make the required investments in the beginning owing to cash crunch. This inability was the outcome of the lock-down amid Covid-19. But now as we are in unlocking phase, we should also pay attention to the financial chores that we had put on hold. It is suggested that you do not end up investing randomly without proper evaluation of tax incidence of the same. If you take a detailed look at the tax saving products plying the market then life insurance must have caught your attention with its dual-sided benefits of tax exemption and extending protection to near and dear ones.

Must read – Top Secrets to Choose the Best Term Insurance Plan

Silver Lining

We usually insure ourselves against events and circumstances which we rather not think about, on a happy go lucky day. Thus, the main objective of getting insurance is ensuring protection against any untoward happening. Many people take up insurance for the sole purpose of tax saving. People are often seen jumping into buying life insurance policies as and when they get into a new job after completing education. Their main goal remains to gain tax exemption from the premium amount paid. However, this becomes detrimental in the long run as the disposable income of individuals gets diverted from the best possible options besides insurance. This leads to a high opportunity cost.

Stay Focused

Term insurance is better equipped to protect the smile of your loved ones without being too heavy in one’s pocket. It provides financial stability to your dependents in case of your premature death. As against the high sum assured amount allowed, the premium paid is extremely low and within your affordability perimeter. With limitless sum assured amount, you can be sure of maintaining your family’s happiness even when you are not around anymore. So, this needs to be linked with the idea of having an objective of protecting a smile via insurance. Tax benefits are also promised as the claim is tax-free and premium is eligible for 80c deduction.

Available Plans

Child Insurance :– The towering cost of education is becoming the biggest cause of worry for Indian parents. This gets heightened by an inadequacy of knowledge, below average savings and a late start. A child insurance plan offers a lump-sum on the policyholder’s death to his children. The future premiums due are waived and the money is invested by the insurance company on behalf of the policyholder. The child is endowed with money at specific intervals as previously planned under the policy. This is one of the best options to look after a child’s well-being even when his parents are not around. Child insurance policies can either be traditional or market-linked. The premium paid on child insurance plan also counts for deduction u/s 80C while the benefits received are tax – free u/s 10(10D).

Must read – Types of Health Insurance policies amid COVID-19

Endowment Policy :– This refers to be a particular form of life insurance which pays a lump sum on the passage of certain time (i.e. its maturity) or on the death of the policyholder. Apart from lending a shoulder in times of crisis, the endowment plans also provide simultaneous growth of money invested. Thus, it serves as the optimum combination of insurance and investment.

ULIPS :- ULIPs provide the best of both worlds. They help in capital appreciation by investing the premium in the capital market and also insurance protection. Moreover, tax saving benefits are also available for both the invested premiums and the returns generated.

It is advisable to contact an insurance advisor as given the multiple policies available in the market it is easy to get confused. However, if you are confident enough to proceed on this path alone then make sure you have done enough research on the subject matter so that you end up with the plan best suited to your needs.

Stay Safe, Stay Insured !