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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 Star 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 Star Term Plan

Another very important tool to ensure your family’s long-term financial safety is the iSelect Star 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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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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