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Term Insurance Can Help You In Reducing Your Tax Liabilities

Term Insurance Can Help You In Reducing Your Tax Liabilities

Tax Liabilities

There is a wide range of financial instruments in the market designed to serve various short-term and long-term goals for the average investor. They come in a variety of budget and risk requirements and each appeals to investors of different backgrounds. However, there is one investment option that always remains relevant and beneficial to investors of all kinds - term insurance.Whether you are an individual or the financial provider for a family, a reliable term insurance plan can provide your dependants with much-needed financial coverage in your absence.

However, there is another reason why term insurance should be considered an essential component of every investment portfolio. Apart from financial coverage and peace of mind, term insurance can also help you in considerably lowering your tax burden. Let us take a closer look at how you too can avail the various term plan tax benefits available to you:

How Does Term Insurance Help You Save Taxes?

Before delving into how term plan tax benefits can be availed, let us review what a term plan entails. A term insurance plan is essentially a form of life insurance that provides coverage to a policyholder for his or her desired time period, or ‘term’. Unlike traditional life insurance policies, the premiums for term plans are considerably more economical. They are also more accessible and offer far more flexibility to the policyholder.

With regards to term plan tax benefits, the Indian government and the Income Tax Department have laid out several provisions to avail deductions for your term insurance premium payments. These deductions, whether taken individually or altogether, considerably lower your taxable income and hence, help you save taxes for each year that your term plan continues. Whether you avail a term plan for yourself or for your loved ones, your premium payments will be eligible for the aforementioned tax deductions.

Tax-Saving Benefits of Term Insurance

Now that we understand the basics of how term insurance can reduce your tax liabilities, let us delve into the specifics. To avail term plan tax benefits, here are some of the most popular tax deductions that can lower your taxable income:

  • Section 80C: One of the most common deductions availed by several term insurance policyholders in India is that offered under Section 80C of the Income Tax Act, 1961. In order to avail a term insurance plan, the policyholder is expected to pay a monthly amount to the insurer, known as premiums. Under Section 80C, these premium payments for life insurance can be deducted from your overall income, for an amount as high as Rs. 1.5 lakh in a financial year. As a result, this reduces your overall taxable income and comes as a huge benefit for term plan policyholders. This deduction under Section 80C can be availed by both individuals as well as Hindu Undivided Families (HUFs). In terms of individual policies, tax deduction can be claimed by an individual, his or her spouse as well as the policyholder’s children.
  • Section 10 (10D) - While there are various term plan tax benefits to be availed, the primary purpose of a term insurance policy is to provide financial security to your beneficiaries. In the event of your unfortunate demise, this financial security is delivered to your loved ones in the form of a predetermined amount known as death benefit. The tax-saving advantage with this amount is that under Section 10 (10D), this entire amount is completely exempted from tax. This is also applicable for the maturity amount received at the end of a term plan with the money-back feature.

Conclusion

With these deductions in place, policyholders with term insurance can greatly reduce their tax liabilities. These term plan tax benefits as well as the ease and accessibility of term insurance are the reasons why it is quickly becoming a popular product among insurance seekers.

If you too would like to avail a term insurance plan to safeguard the financial future of your family, consider availing the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. This term plan grants options for extensive coverage, various add-on covers and the opportunity to lower your tax burden with deductions up to Rs. 1.5 lakhs under Section 80C.

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Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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