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.
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.
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.
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).
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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 !