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Top 5 Life Insurance Plans for Long-Term Goals & Tax-Saving

dateKnowledge Centre Team dateMay 24, 2021 views137 Views
Life Insurance Plans | Tax Saving Plans

Inflation and taxes are two universal factors that work against your wealth. The solution is simply to invest your money in options that can grow your money more than both. One of the best investment options in this parameter is a life insurance plan. Life insurance plans are some of the best tax-saving investments in India. Most life insurance plans offer EEE tax efficiency on investments which is the highest you can expect. EEE is an acronym that stands for Exempt-Exempt-Exempt. EEE category investments are exempt from tax at every stage and thus, allow you the maximum tax benefit. Every investment goes through the following three stages:

1. Investment or Contribution Stage

2. Earning or Growth Stage

3. Withdrawal & Maturity Stage

Here are five life insurance plans you can rely on to meet your long-term goals with maximum tax efficiency and investment value:

  • Wealth Building: Invest 4G ULIP
  • Income: Pension4Life & Guaranteed Income4Life
  • Safe Investment: Guaranteed Savings Plan
  • Health Emergency: Health First Plan
  • Adequate Financial Safety: iSelect Smart360 Term Plan

1. Invest 4G ULIP

Unit Link Investment Plan is an insurance plan with an investment feature. Here, a part of your premium is dedicated to your life cover and another you will use for investment purposes, from where you will yield returns.

It is a flexible investment plan, with a choice of 8 unique fund options for allocating your money. These funds are majorly divided into four risk-return categories:

  • Equity Funds
  • Debt Fund
  • Liquid fund
  • Balanced Fund (a dynamic mix of equity and debt instruments)

The Invest 4G ULIP plan also allows four automated portfolio management strategies. These strategies will enable you to manage your portfolio according to the market without having to regularly pay attention to your folio.

If you are investing in equity funds Invest 4G plan allows you to:

  • Maintain a fixed asset allocation ratio, i.e., 50:50 in equity and debt funds
  • Safeguard your returns from equity funds, i.e., the portfolio growth is transferred to a debt fund after reaching a threshold
  • Allocate your annual investment to equity fund systematically, for example, you are investing Rs. 120,000 in a year, but you need to invest Rs. 12,000 a month to benefit from rupee cost averaging in equity funds
  • Systematically switch from equity funds to safer debt fund in the final few years of the plan

It is one of the most flexible plans which allows you a systematic or partial withdrawal facility as per your need. Loyalty additions and wealth boosters help grow investment.

2. Pension 4Life & Guaranteed Income4Life

Pension 4Life and Guaranteed Income4Life are annuity investments that help you to generate regular income out of your investment. You can buy these annuity plans with a single lump-sum investment or multiple instalments whichever suits you.

Buying an annuity plan jointly with your spouse allows the pension to continue for your spouse even after your demise.

Both plans can continue to provide income until your natural demise or until you reach the age of 99 years. In the case of joint holding, the income will continue until the surviving spouse reaches the age of 99 years.

3. Guaranteed Saving Plan

This is a safe investment plan which offers you, life cover and a guaranteed return on maturity. Thus, this is the best investment if you want to achieve a very important financial goal for your family.

Other important features of Guaranteed Savings Plans include:

  • Loyalty bonus additions for long term regular investment
  • Annual bonuses for long-term growth
  • Premium protection option to continue investing even after your death and guarantee the goal achievement for the family

4. Health First Plan

Financial safety is as important for your family as is the financial future. Health First plan is a health insurance cover for safeguarding your family from the financial burdens of critical diseases.

For example, heart ailments, cancer and 26 other life-threatening illnesses. Health First plan gives you the following two options of health covers:

  • Heart Cover
  • Cancer Cover
  • Major Critical Illness Cover

The plan pays a lump-sum amount upon the diagnosis of illness. The unique benefit of the heart and cancer cover plans is that even the minor conditions are covered by the plan.

Life Insurance Plans | Tax Saving Plans

An increasing cover option is available with all three plans, which will keep up with your growing medical expenses.

After Diagnosis of a Covered Condition

In the case of a diagnosis of a minor condition (under heart or cancer cover only), all future premiums would be waived off and the plan will continue. It also offers you a monthly income benefit option, in case of diagnosis of the major condition under any cover plan you will get 1% of the sum assured every month for 5 years.

Tax Exemption of Health First Plan

Under Section 80D, you can claim a deduction up to Rs 25,000 premium paid for self, spouse, and dependent children

  • An additional deduction for parents up to Rs 25,000
  • If you or your parents are above 60 years, then the maximum deduction you get for a senior citizen is 50,000
  • If you and your parents, both are above 60 years then a maximum deduction of Rs 1,00,000

5. iSelect Smart360 Term Plan

Another very important tool to ensure your family’s long-term financial safety is the iSelect Smart360 Term Plan. This term plan comes with an in-built major critical illness coverage.

Thus, with this term plan, you can add cancer and heart cover to ensure coverage of minor conditions as well.

Other add-on benefits include:

  • Accidental Death Cover: Additional sum assured on accidental death
  • Accidental Disability Cover: Premium waiver on life cover or financial benefit upon severe permanent disability due to accident
  • Child-Support Benefit: Additional sum assured payable in a lump sum for the benefit of your child. If you bought the policy before childbirth, you could add this rider to the policy within a year of the birth of your child.

Tax Deductions on Life Insurance Plans

The life insurance plans that allow you to get tax exemptions under various sections of the Income Tax Act, 1961 are as follows:

  • Annual premium paid up to Rs 1.5 lakh is tax-exempt under Section 80C
  • Death benefit (and rider benefit if any) or maturity funds received are exempt from tax under Section 10 (10D)

Thus, with life insurance plans you can not only build your wealth to meet your future goals but also ensure long-term financial safety. Needless to say, that both investment and safety come with high tax efficiency. The amount you invest reduces your tax liability in the year of investment. The accrued interest in the investment does not attract tax and any withdrawal upon maturity also remains tax-free.

Thus, your investments will only need to fight against inflation. Such tax efficiency plays an important role in the growth of your wealth especially when the investment period is long.

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